Dow Jones PRIVATE EQUITY ANALYST June 2015

Sources of Capital Smallest Endowments Look Beyond Yale Model Small Universities Embrace PE p.14 Pension Funds Remain Top LPs p.17

INSIDE PE Firms Speed Up Portfolio Company Exits p.20 Kentucky Raises PE Bar Amid Funding Woes p.23 Spirits Capital Toasts Millennials’ Taste Buds p.24 Heavy Debt Weighs on Weight Watchers p.38 is pleased to announce the closing of

ASIA ALTERNATIVES CAPITAL PARTNERS IV, LP

AACP IV EX-JAPAN INVESTORS, LP $1,000,000,000

A private equity fund-of-funds formed to invest in a diversified portfolio of Asian managers

April 2015

The undersigned acted as the global placement agent and arranged for the private placement of certain limited partnership interests. Private Equity Analyst June 2015 contents Volume XXV, Issue 6

Comment Limited Partners u Editor’s Note u Kentucky Retirement Systems Raises Japan’s GPIF and the Curse of the Large Limited Partner 3 the Bar for PE as It Faces Funding Woes 23

News Fund News u Briefs u General Partners: Buyout Cobepa Starts U.S. Operations, SEC Examining Spirits Capital Cheers On Blackstone Fees, Carlyle Plots Return to Silicon Valley 4 Millennials’ Taste for the New 24 This Month in PEA’s Pages... 5 u General Partners: VC Best of Our Blogs 9 Menlo Ventures Stays Fresh u Comings & Goings With $400M for Fund XII 25 Mike Duke, Ted Ullyot, Ronald Cami, Saguna Malhotra 12 u The Roundup Banc Funds Closes on Around $416M for Bank Deals 26 Analysis I Squared’s Debut Infrastructure Fund Collects $3B 27 Atlas Venture Hits $280M Cap for Biotech-Only Fund 30 u Top Story IVP Reaches $1.4B Final Close on Fund XV 31 Beyond Yale: Small Endowments Redpoint Ventures Gathers $400M for Fund VI 32 Embrace PE With Their Own Models 14 Elysian Capital Hits £180M First Closing on Debut Pool 34 EQT Sets €6.75B Hard Cap for Latest Fundraising Effort 35 Lightspeed Raising Up to $115M for India-Focused Fund 37

Deals & Exits u LBO Focus Debt Weighs On Weight Watchers as Dieters’ Habits Change 38

u VC Focus Venture Capital Continues to Flow Into Chinese Startups 40

People u Rising Stars u Features Deal Makers Dominate Europe’s Under-40 Rising Stars 42 Pensions Are Still LP Top Dogs, but Wealthy Investors Gain Ground 17 u Q&A Spring Cleaning: PE Firms Exit A Private Word With David Wilton 44 Portfolio Companies at Faster Pace 20 Amid Tepid Returns, LPs Approach Emerging Markets Cautiously 21 u Industry Data Despite Exits, PE Returns Disappoint 22 2 Private Equity Analyst June 2015 editorial Managing Editor, Newsletters Reporter, Private Equity Private Equity Analyst Nicholas Elliott Hillary Canada Sales & Marketing [email protected] [email protected] Director of Sales Erin Sheepo | 415-439-6619 [email protected] Assistant Managing Editor, Reporter, Private Equity Marketing Manager Private Equity Shasha Dai Alexis Cope | 212-416-3570 Laura Kreutzer [email protected] [email protected] [email protected] Advertising Account Executives News Editor, Private Equity Reporter, Private Equity Joseph Koskuba | 212-416-3879 David Smagalla Dawn Lim [email protected] [email protected] [email protected] James Lindquist | 415-439-6665 [email protected] Editor, Europe Reporter, Private Equity Production & Design Manager, Production Ayesha Javed Amy Or Tim White [email protected] [email protected] Assistant Manager, Production Tara Sapienza Cooper Editor, Venture Reporter, Private Equity Desktop Publishers Mike Billings Lillian Rizzo Heather Graham, Renee Kohut [email protected] [email protected] Administration CEO, Dow Jones & Co. William Lewis Editor, Venture Reporter, Venture [email protected] Christopher Zinsli Lizette Chapman Published monthly at 1211 Avenue of the Americas, [email protected] [email protected] Fifth Floor, New York, NY 10036 ISSN No 2156-7271 Editor, Private Equity Reporter, Venture Dow Jones Private Equity Analyst, Financial Markets, Thomas Dunford Yuliya Chernova Building 1, P.O. Box 300, Princeton, NJ 08543 [email protected] [email protected] © 2015 Dow Jones & Company, Inc. All rights reserved. Dow Jones & Company is a News Corp Company. Copying and redistribution prohibited without permission Editor, Private Equity Reporter, Venture of the publisher. Dow Jones Private Equity Analyst is Michael Lucas Deborah Gage designed to provide factual information with respect to [email protected] [email protected] the subject matter covered, but its accuracy cannot be guaranteed. Dow Jones is not a registered investment adviser, and under no circumstances shall any of the Editor, Private Equity Reporter, Venture information provided herein be construed as a buy or Chitra Vemuri Russ Garland sell recommendation, or investment advice of any kind. [email protected] [email protected] www.dowjones.com/privatemarkets/pea.asp

Subscribe to Private Equity Analyst Reporter, Asia Reporter, Venture www.dowjones.com/privatemarkets | 877-633-8663 Sonja Cheung Brian Gormley Customer Service 609-520-7779 or 866-291-1800 [email protected] [email protected] Reprint Services 800-843-0008 Reporter, Europe Reporter, Venture Photo Credits Alec Macfarlane Tim Hay cover, p1: f11photo/shutterstock.com; p5: Justin [email protected] [email protected] Sullivan/Getty Images; p6: Shutterstock.com; p8: Douglas Litchfield/Shutterstock.com; p9: Helga Esteb/Shutterstock.com; p11: ©istockphoto. Reporter, Europe Reporter, Venture com/Mice007; p15: hxdyl/shutterstock.com; p17: Becky Pritchard Lora Kolodny ©istockphoto.com/DPLight; p20: Jarous/Shutterstock. com; p21: ©istockphoto.com/clintspencer; p24: Cristi [email protected] [email protected] Lucaci/Shutterstock.com; p26-37: ©istockphoto.com/ scibak (maps); p39: ©istockphoto.com/Lya_Cattel (Weight Watchers), ©istockphoto.com/wragg (tape measure); p43: ©istockphoto.com/OJO_Images To trial our sister publication Private Equity News contact: T: +44 (0)20 3217 5374 | E: [email protected]

55% Recycled Fiber Follow us on Twitter at @DJPrivateEquity and @DJVentureWire. 30% Post Consumer Fiber Visit us online at http://pevc.dowjones.com Private Equity Analyst 3 June 2015 comment Japan’s GPIF and the Curse of the Large Limited Partner

years firms, at least initially, to invest capital as efficiently Over the past five or so, as possible. In an environment where pricing Japan has hardly been a robust source of capital for investments has already approaching, if not for private equity firms on the fundraising trail, exceeding, boom-era levels, an influx of even more particularly when compared to some of its Asian capital could put downward pressure on the very neighbors, most notably China. returns GPIF needs to help support the nation’s rapidly aging population. But that may be about to change, thanks to recent reforms pushed by Japanese Prime Minister Shinzo That said, even a dip in median private equity Abe that have led to allocation shifts by the Japan’s returns may still outperform traditional stocks and national pension system, the Government Pension bonds over the long run, particularly amid somewhat Investment Fund, also the world’s largest pension pool. lackluster global growth rates of late.

Over time, the GPIF expects to invest up to 5% That backdrop has helped ensure that pension funds of its 137 trillion yen ($1.1 trillion and, yes, you remained the mainstay of private equity over the past read that year, as evidenced in our latest Sources of Capital correctly, trillion) survey (Pensions Are Still LP Top Dogs, but Wealthy Laura Kreutzer portfolio to Investors Gain Ground). However, family offices and Assistant Managing alternative assets wealthy investors, as well as investors from areas of Editor, Private Equity such as real Asia outside of Japan, also expanded their share of estate, private the commitment pie. Analyst equity and infrastructure, Also in this month’s Sources of Capital issue, mainly within Dawn Lim reports that some of the nation’s its equity and fixed income portfolios. GPIF easily smallest endowments are looking beyond the has the potential to become the largest new limited Yale model as they carve their own paths into partner the industry has seen in a long time. Even private equity (Beyond Yale, Small Endowments a modest 5% allocation would translate into an Embrace PE With Their Own Models), and alternatives portfolio of some $50 billion. Hillary Canada covers the renewed caution among LPs toward emerging markets private As anyone who has lived in Japan knows well, equity (Amid Tepid Returns, LPs Approach change often comes slowly. Expansion into Emerging Markets Cautiously). alternative assets is likely to be gradual, particularly given the reforms underway at GPIF have Stay tuned for our midyear fundraising issue next themselves been subject to political debate. month as well as coverage from this year’s Private Equity Analyst conference. But even if the pension system starts with only a modest 1% allocation, investing such a large As always, we welcome your feedback on how we amount of capital would pose challenges both for can improve our coverage. GPIF and the industry itself. As most fiduciaries know well, given the time it takes for private equity firms to find deals, GPIF will have to commit more Sincerely, to the asset class than the allocated amount in Laura Kreutzer order to get the money invested. Assistant Managing Editor Dow Jones Private Equity Analyst Even if it builds a large investment staff, it will [email protected] likely need to lean heavily on large global buyout @LauraKreutzer 4 Private Equity Analyst June 2015 news

Briefs “This is a positive change.” SEC: PE Improving Disclosure – Marc Wyatt, acting director of the SEC’s Offce of Compliance, Inspections and Examinations, on moves by the private equity industry to review and change practices Private equity firms have improved their disclosure of fees and expenses but on the disclosure of fees and expenses the regulator found questionable. have more work to do to make sure investors are getting all of the information a medium- to long-term perspective, of such fees, often called monitoring- they need, a Securities and Exchange we plan to manage on behalf of our termination fees, which are charged Commission official said. Marc Wyatt, investors substantial assets in the U.S. by many private equity firms but have the acting director of the SEC’s and have been progressively building become controversial. The decision to Office of Compliance, Inspections up a presence there.” The Brussels firm, curb the fees by Blackstone represented and Examinations, said at the Private set up in 1957 and bought out by a a significant U-turn in an industrywide Fund Compliance Forum 2015 in New group of European family investors from practice, and promised to save the firm’s York that private equity firms and their BNP Paribas SA in 2004, has until now investors tens of millions of dollars. In its investors are “more focused” on fees never made a U.S.-based investment. most recent quarterly filing, Blackstone and expenses, and that has prompted It focuses on European investments, said, “Recently, the SEC has informally the industry to review and often change though the firm said it has significant requested additional information practices regulators have highlighted economic interests in the U.S., Asia and about our historical monitoring fee as questionable. “This is a positive South America because of its portfolio termination practices.” Blackstone change,” Mr. Wyatt said. He added companies’ businesses. Mr. Laurent said the SEC also has sought new that there is “room for improvement” Josi said the firm hired Peter Connolly, information about a different practice, in how firms allocate expenses and a former principal and co-head of health involving “the application of disparate manage co-investments, in which care at Summit Partners, in February as vendor discounts to Blackstone and fund investors such as pension funds a managing director to lead U.S. efforts. to our funds.” The filing didn’t explain and sovereign wealth funds directly The firm has also relocated Investment those further, but said the practice participate in certain deals. Mr. Wyatt’s Director Gilles Davignon to New York was changed in 2011 and previously comments come as private equity as part of efforts to tap the U.S. market. was reviewed by the SEC in 2012. firms come under increasing scrutiny The company said it is in “discussions for their fee and expense practices. with the SEC regarding a potential SEC Examining Blackstone Fees resolution of these matters.” Blackstone Group said the Securities Cobepa Starts U.S. Operations and Exchange Commission recently Cobepa SA is the latest investment requested information about some Apollo Appeases Debt Investors firm to cross the pond to tackle the U.S. of its fee practices, including its pre- Apollo Global Management is private equity market. “The U.S. is by 2014 collection of large one-time embarking on an unusual campaign to far the biggest and most liquid private fees when selling or taking public improve its image with debt investors equity market,” said Cobepa Managing companies it controlled. Blackstone after a series of spats between the Director Jean-Marie Laurent Josi. “From last year voluntarily curbed its collection private equity firm and creditors in some of its troubled deals. Apollo is preparing to meet with big debt investors, including mutual-fund European Investors Submit to Looser Loan Terms managers, in several cities over the next few months to ease concerns The level of debt issued by private equity-backed companies that offers little the firm protects its investments in protection to creditors has reached a new high, as frms take advantage of investors’ troubled companies at the expense of hunt for yield in a low-interest-rate environment. creditors, according to people familiar Nearly half of European leveraged loans issued in the frst quarter of this year, worth with the matter. In the meetings, which a combined €5 billion, were covenant-lite, according to data provider S&P Capital are slated to begin in May, Apollo will IQ LCD. This represents 43% of total institutional leveraged loan volume on the try to persuade investors the debt continent, marking the highest quarterly proportion on record. issued to fund its corporate buyouts is a good investment, the people said. Deals without covenants used to be rare in Europe but have become increasingly The ongoing restructuring of casino popular as the market evolves to compete with the high-yield bond and U.S. owner Caesars Entertainment Corp., leveraged loan markets. which Apollo bought in 2008 with “European institutional lenders were facing an existential crisis, given competition fellow private equity firm TPG Capital, from high-yield and Yankee [U.S.] issuance in 2012 and 2013,” said Graham Tufts, angered creditors who felt burned by head of leveraged and acquisition fnance for Europe, the Middle East and Africa at the firm’s moves. Apollo plans to say HSBC Holdings PLC, “and have gradually grown more accepting as they realize they that, over time, bonds and loans backing could lose opportunities to other capital markets.” its leveraged buyouts have delivered market-beating returns, the people said. Private Equity Analyst 5 news June 2015

Pao Disputes $1M Bill promoting her, and retaliated by later executive vice chairman, and other firing her. The verdict followed a five- early Alibaba executives are setting up Ellen Pao is pushing back against week trial in San Francisco Superior the office in Hong Kong with an eye Kleiner Perkins Caufield & Byers’s Court that drew national attention. The to opening this summer, according to request that she pay nearly $1 million in firm offered to waive the $972,814.50 one of the people. Mr. Tsai controls a expenses for the venture capital firm’s in costs if Ms. Pao agrees not to appeal. roughly $6.5 billion stake in Alibaba, witnesses during her sex-discrimination In a statement Friday, Ms. Pao called based on the company’s prospectus. trial, saying the costs were “grossly that “an offer that had no value.” Ms. Pao With the company’s shares now publicly excessive and unreasonable.” Kleiner has until June 8 to appeal. A hearing on traded and lockups expiring, he and the Perkins asked Ms. Pao to pay the costs Kleiner Perkins’s request for the costs other executives are looking to diversify April 22, nearly four weeks after it won is scheduled for June 18. In a filing, their wealth. The family office will be a jury verdict on her claims the firm Ms. Pao’s attorney noted her legal fees co-managed by Oliver Weisberg, a had discriminated against her in not had climbed to more than $632,500 in managing director in Citadel LLC’s Hong November – before the trial. Kong office, and Alexander West, the founding partner of Blue Pool Capital Ltd., a Hong Kong-based hedge fund Alibaba Exec Aims to Invest backed by Mr. Tsai, the person said. A top Alibaba Group Holding Ltd. executive is forming a multibillion- dollar family office to invest the wealth Carlyle Plots Silicon Valley Return created by the Chinese e-commerce Some six years after Carlyle Group giant’s $25 billion New York initial public closed its Menlo Park, Calif., office, the offering, according to people familiar private equity firm intends to replant with the situation. Joseph Tsai, Alibaba’s its flag in Silicon Valley this fall. Carlyle

this month in PEA’s pages...

u 1 YEAR AGO u 5 YEARS AGO u 10 YEARS AGO u HISTORICAL DATA With the secondary market The passage of U.S. health- It was the era of club deals starting to heat up last year, care reform may be one of and megafunds, and large more large portfolios of the sparks that got nearly 40 institutional investors were private equity interests began private equity frms that invest starting to up the ante as LBO Fundraising hitting the market. Ardian in the industry to form a trade well, making supersize scooped up a $1.3 billion group to increase their visibility commitments or taking steps $80.03B portfolio of private equity in the sector. The Healthcare to do so. Over the preceding stakes from General Electric Private Equity Association eight months, California Co.’s GE Capital. The portfolio, was the frst sector-focused Public Employees’ Retirement $26.20B predominantly made up of trade group within the private System, Oregon State $21.15B U.S. midmarket buyout funds, equity industry, and its Treasury and Washington included as many as 300 founding members included State Investment Board fund stakes, Private Equity both midmarket and large each handed out individual 2014 2010 2005 Analyst reported at the time, frms such as Apax Partners, fund commitments of citing two people familiar Frazier Healthcare Ventures, $300 million or more. And with the matter. Meanwhile, Beecken Petty O’Keefe and larger commitments were fund-of-funds manager Co., Kohlberg Kravis Roberts on the horizon. Calpers HarbourVest Partners was & Co., Linden LLC, Madison approved a proposal to allow VC Fundraising shopping a portfolio of Dearborn Partners and commitments of as large as private equity stakes valued Welsh Carson Anderson & $800 million to “top quartile at around $500 million as it Stowe. “HCPEA will work to funds” without prior board $14.37B $10.59B sought to take advantage of demonstrate the attractiveness approval, while the board $5.86B generous pricing conditions of health-care private equity at California State Teachers’ 2014 2010 2005 in the secondary market. to the investment community, Retirement System was set to The frm sold the portfolio in as generally health care has vote on a proposal to allow early June 2014 to Goldman been under-represented in staff to approve commitments Sachs Asset Management. the private capital markets,” of as large as $500 million said Brian Miller, the to funds it backed previously Based on multiple closings through June 1 of the given year. association’s co-founder. without board approval. Source: Dow Jones LP Source 6 Private Equity Analyst June 2015 news opened its Menlo Park office in early become a key man, while Joe Delgado, and in 2016. “It is less competitive in the 2008, but that December, in the depths a member of the energy and industrial lower end of the market,” he added. The of the economic downturn, Carlyle said team, has been removed from the slate. co-founders’ previous firm, NGP, has it would shutter the office amid firm- The firm opened discussions with formed a “long-term strategic investment wide layoffs. “We feel it’s important to investors in CCMP Capital Investors III relationship” with Citrine, and will make have a presence on the West Coast to to alleviate concerns when Mr. Murray’s capital available for “investment from deepen our network of relationships,” departure from the firm was imminent, time to time directly in the future portfolio said Pete Clare, Carlyle’s co-head said two people with knowledge of companies of Citrine,” the firms said of U.S. buyouts. Carlyle hopes those the situation. Promised new investor in a release at the time. Mr. Goodman relationships will help it find companies protections, the limited partners declined to elaborate on the relationship to invest in as well as executives to supported a reinstatement of the fund’s with Irving, Texas-based NGP or com- run them. Patrick McCarter, a Carlyle investment period, providing the firm a ment on Citrine’s capital raising plans. managing director currently based in vote of confidence as it looks to name a Washington, D.C., will lead the firm’s permanent chief executive. Menlo Park office. Carlyle’s return to TowerBrook Vets Form New Firm Silicon Valley comes amid a slew of A group of former TowerBrook buyout activity in the technology sector. Energy Firm Targets Small Deals Capital Partners executives are in Three former principals of Natural Gas talks with investors about raising Partners have launched Citrine Energy capital for their newly established CCMP Gets Investor Vote Capital Management, which will focus firm, Freshstream Capital Partners. CCMP Capital Advisors won support on smaller transactions in the energy Rayhan Davis, Adam McClain and to resume investing from its latest space. “We saw an opportunity, par- Patrick Smulders, all former managing fund following the departure earlier ticularly in the lower end of the middle directors at TowerBrook, left earlier this year of Stephen Murray, the firm’s market, which we define as sub-$75 mil- this year and are in early-stage talks former president and chief executive lion equity checks,” said Daniel Good- with investors to raise capital for their who died in March, said people with man, a co-founder and partner of Citrine. first private equity vehicle targeting knowledge of the matter. Mr. Murray’s “We believe now is an attractive time proprietary investments in western departure triggered a key-man clause to invest in small and midcap oil and European companies, particularly those for the $3.6 billion fund, CCMP Capital gas [companies],” said Mr. Goodman. in the U.K. and the Benelux region. Investors III LP, which the firm finished Citrine, with offices in Dallas and Hous- Mr. Davis served as a deal maker at raising last year. Mr. Murray died after ton, targets investments of $25 million TowerBrook and was also responsible he left CCMP and following a leave of to $75 million of equity in the North for debt financing across the firm’s absence, said a person familiar with the American upstream, midstream and European portfolio. Mr. McClain was matter. CCMP has updated the list of oilfield services sectors. Mr. Goodman TowerBrook’s European general key persons for its latest fund. Douglas said the firm’s principals expect to see counsel. Mr. Smulders served on the Cahill, an operating partner, has more energy asset sales later this year investment committee of TowerBrook and before that was part of the founding team at Doughty Hanson. Blackstone Gives Moms More Time Off Blackstone Group said that it is Pentagon Enters Silicon Valley extending its maternity leave benefts The U.S. Department of Defense plans to 16 weeks at full pay from 12 weeks. to open its first office in Silicon Valley The move, announced in a memo to and provide venture capital in an effort employees, is designed in part to help to tap commercial technology that can the company compete for talented be used to develop more advanced Wall Street women. weapons and intelligence systems. “The fnancial services industry has Pentagon officials said the twin moves historically struggled to attract and are part of the department’s broader retain women,” Chief Executive Stephen effort to field technology more quickly Schwarzman said in the memorandum and cheaply amid concerns potential reviewed by Private Equity Analyst sister publication The Wall Street Journal. “By having adversaries such as China are closing strong policies in place that support working mothers…we hope to help make asset the gap or surpassing U.S. capabilities. management a more attractive industry for women.” However, the Pentagon’s push faces resistance from technology companies The cost of the extended maternity leave will be pocket change for Blackstone, which and the venture capital community, has been positioning itself as a top career destination for the best and brightest, akin which has long been wary of becoming to Apple Inc. and Google Inc. ensnared in the department’s “With leadership comes the responsibility to set the bar a little higher. I hope bureaucracy and uncertain budget everyone follows,” said Blackstone President Hamilton “Tony” James. outlook. The Pentagon’s planned office in Moffett Field is expected to LP_LCP8_10bTombAd_HFA+PEA_DR041515.pdf 1 4/15/15 4:07 PM

April 2015

$10,100,000,000

C

M

Y

CM

MY

CY Lexington Capital Partners VIII, L.P.

CMY

K

THIS PARTNERSHIP HAS BEEN ESTABLISHED TO ACQUIRE A DIVERSIFIED PORTFOLIO OF PRIVATE EQUITY AND ALTERNATIVE INTERESTS IN THE GLOBAL SECONDARY MARKET.

New York 660 Madison Avenue, New York, NY 10065 212 754 0411 Boston 111 Huntington Avenue, Suite 3020, Boston, MA 02199 617 247 7010 Menlo Park 3000 Sand Hill Road, 1-220, Menlo Park, CA 94025 650 561 9600 London 50 Berkeley Street, London W1J 8HA 44 20 7399 3940 Hong Kong 15/F York House, The Landmark, 15 Queen's Road Central, Central, Hong Kong 852 3987 1600

[email protected] www.lexingtonpartners.com 8 Private Equity Analyst June 2015 news

to that goal, the Alaska Retirement the infrastructure of health care. It’s Management Board is calling for a considered the largest dedicated “measured increase in commitment health-care [information] technology pacing” over the decade, and targeting fund.” The size of the new fund, as well $517 million in commitments in 2019 as the composition of limited partners – the halfway mark for the 10-year plan who invested in it, show that health-care – and $542 million in 2024, according information technology, which some to the documents. The pension fund firms refer to as “digital health,” has committed $593.8 million to private indeed become a white-hot sector. equity in 2014, exceeding a $450 million commitment target. It decided have around 15 staffers drawn from to go beyond its allocation target to get Ohio LP Withdraws Commitment active-duty military and reservists. The into new special situations funds in the The Ohio Police & Fire Pension Fund department plans to use In-Q-Tel, a market, according to documents. withdrew a $40 million commitment venture capital firm set up by the U.S. to Black Diamond Capital intelligence agencies in 1999, as the Management’s latest $1 billion fund conduit. It will provide a small amount Foundation Becomes Flare offering, amid growing doubts from of seed capital during a one-year pilot Software and big-data technologies investors on whether the distressed- program with the firm. are upending the country’s system of for-control market is deep enough delivering health care, and venture firm to generate attractive returns for all Foundation Medical Partners wants the firms jostling to raise money. The Alaska Fund Calls for Boost to be in the middle of the fray. So the pension fund won’t follow through with Aiming to build out its private equity firm will cease investing in medical an earlier pledge to BDCM Opportunity portfolio, the Alaska Retirement devices and therapeutics, and will focus Fund IV LP “after further evaluation of Management Board has proposed exclusively on health-care software and the midsize distressed debt market,” raising annual commitments to the services as it relaunches with the name said David Graham, a spokesman asset class gradually in the next Flare Capital Partners. The rebranded for the $14.9 billion pension fund. It decade, with plans to pledge $499 firm sets out with a new, $200 million has also decided “not make any new million in 2015, $502 million in 2016 fund, Flare Capital Partners I LP, which commitments to the space at this and $507 million in 2017. Private is the same size as the firm’s three time,” he said. The Columbus, Ohio, equity investments as of Dec. 31 made previous funds combined, General pension fund didn’t elaborate on its up 7.8% of a $22.63 billion portfolio Partner Michael Greeley said. He added about-face, and a spokesman for the board has been overseeing, short that a source of confusion about the Black Diamond declined to comment. of a 9% goal, according to investment firm could be traced to other firms and The firm, which aims to gain control documents released in advance of a companies using the word “foundation” of companies through the purchase meeting in late April. The pension fund in their titles, including Silicon Valley- and restructuring of debt, is said to is expected to have 10% of its portfolio based Foundation Capital. “Also,” Mr. have amassed $600 million to $650 in private equity by 2024, according to Greeley said, “we’re not really medical million for Opportunity Fund IV so far, a proposed pacing plan. To get closer anymore. This fund is dedicated to said a person familiar with the matter.

S.C. Raises Pacing Targets Big Appetites for Small Stakes The South Carolina Retirement Systems plans to make about $750 In a market where valuations are high and private equity frms are facing increased million in commitments to private equity competition from strategic buyers for deals, getting access to deals through minority in the year starting in July and signaled stakes can be fruitful. it is interested in energy strategies and The value of minority stakes in the European private equity market increased smaller managers. The pension system substantially last year. According to data provider Dealogic Ltd., the total value of targeted private equity commitments minority investments more than doubled to $11.93 billion across 296 deals last of roughly $150 million to $450 million year, from $5.94 billion across 291 deals in 2013. It was the highest annual total in the previous year, a time when many since minority investments stood at $19.99 billion across 330 deals in 2008. The limited partners received record cash fgures are based on stakes of 45% or less. distributions and had more capital to put to work. As it looks to deploy funds, “Everyone would love to do 100% buyouts, but the market is such that sellers aren’t the $29.51 billion pension fund investor putting enough of those assets on the market,” said Marco Compagnoni, a partner at intends to investigate ways to profit law frm Weil Gotshal & Manges LLP. from the selloff in the energy markets, One of the biggest benefts of minority deals is they give private equity frms the according to a draft annual investment opportunity to invest in businesses unavailable in the market, often because the plan the South Carolina Retirement management is reluctant to concede control. System Investment Commission approved in late April. “The recent drop Private Equity Analyst 9 news June 2015

best of our blogs Jennifer Lopez Tells Venture Capital Next up for Ms. Lopez is developing her partnership with NuvoTV, the English-language cable network for U.S. Latinos in which she Conference How to Create a Brand has a stake. NuvoTV is backed by Rho Ventures, and Ms. Lopez Venture Capital Dispatch, May 6 said she is working with Rho Managing Partner Mark Leschly to Singer, dancer, actress, philanthropist and now entrepreneur help her fgure out how to create a billion-dollar company. Jennifer Lopez appeared before the National Venture Capital “I bring a different spark…than what they have when I Association to reveal the secrets of her business success. walk into a room of business people, but you need both the With 100 million followers on social media, a hit movie and creative and the business side,” she said. “So over the next partnerships with Kohl’s Corp., Verizon Wireless and several other 10 to 20 years, we’re going to build something that’s never global brands, the svelte been done before.” 45-year-old said she has gotten as far as she has by working “really, SEC’s Rozenblit Urges Private Equity really hard,” taking risks, to Follow the Golden Rule surrounding herself with Private Equity Beat, May 13 partners who have skills that she lacks and never Private equity frms that wish to stay on the good side of forgetting who she is. the Securities and Exchange Commission should follow one simple rule, according to one of the men charged with “I’ll always be Jenny from examining the industry. the block, and I love that,” she said, adding that Igor Rozenblit, co-head of the private funds unit of the SEC‘s she grew up in modest Offce of Compliance Inspections and Examinations, said the circumstances in the regulator’s primary concern has been protecting the rights of the Bronx and started singing investors who back private equity funds. and dancing just so she “Do unto others as you’d have them do unto you,” Mr. Rozenblit could make herself proud. told attendees at a private equity conference hosted in As a woman and a mom and a Latina, she said, “I inspire and Washington by the International Finance Corp. and the Emerging empower them to do it as well. I have done it, and if you work Markets Private Equity Association. hard, you can do it as well. That’s part of who I am and my brand.” Moreover, private equity fund managers should avoid another Successful brands need to be authentic, said Ms. Lopez, version of the “golden rule,” which Mr. Rozenblit said he later who described how she and her team constantly challenge heard in business school: “He who has the gold makes the rules.” themselves to create something of quality that will make a “I would urge you not to follow that principle,” he added. difference in the marketplace. The regulator is taking a closer look at the industry and pushing Her partnership with Kohl’s, for instance, arose because “as a Puerto for better governance and transparency in the hope that PE frms Rican girl from the Bronx who really had no money, I wanted fashion will move toward resolving disconnects with investors, said Mr. and style at an amazing price, and now I have the opportunity…to Rozenblit, who added that the views he shared were his own give fashion and style at a price that’s attainable, that’s authentic. and not that of the SEC. People get that. It works, and that’s how you create a multimillion- “We hope you go and fx it yourself,” said Mr. Rozenblit, dollar brand.” encouraging more self-regulation in the industry. People who represent brands have to understand why they “Sometimes fund managers have this idea that if all competitors attract followers, she said. After her frst movie, Mi Familia, engage in a practice, they can as well, because investors must people associated her with Latinos and families, she said, and know about it,” he said, pointing to so-called monitoring fees as after her frst hit song they associated her with love. an example of such a practice. “These things start becoming your brand, and if you can stay A number of frms have migrated away from that practice or in that lane and understand that – I’m an artist, and art and started sharing the proceeds with investors. business is the same. You stay with what is real to you,” Ms. Lopez said. “It’s about knowing who you are.” “There were a few [limited partners] that knew about it, but they were mainly the ones that were doing co-invest[ments],” Mr. Successful brands also convey emotion, she added, like the Rozenblit said, adding that frms should clarify their processes association that State Farm creates between insurance and early in a fund’s formation. good neighbors. For a partnership she has with BodyLab, which makes weight-loss products for women, the hashtag on Twitter is “If there’s something going on in your fund complex, investors #bethegirlofyourdreams. should know about it,” he said. 10 Private Equity Analyst June 2015 news

consultant that assisted with CUNY’s VC Trade Group Steps Up Diversity Push portfolio review, will make private equity fund recommendations to the trustees The National Venture Capital Association, which has been pushing to get venture at future meetings, this person said. capital frms and their portfolio companies to hire more diverse workforces, has found several new ways to attack the problem. Liquidnet Offers Pre-IPO Access “I know we have a long way to go, but everyone gets it,” said ScaleVP General Partner The runway to initial public offerings Kate Mitchell, who is co-chairing a task force on diversity the NVCA launched in December. could grow even longer if Liquidnet By diversity, the trade group means not just women, but also minorities, veterans, Inc. executes on its plan. Liquidnet, people with disabilities, and lesbian, gay and transgender people. All of these groups a 14-year-old operator of so-called are underrepresented in venture frms and in startups. dark pools for trading stocks, is attempting to create a market for Diversity has become a painful topic in the tech industry, with surveys showing that the buying and selling pre-IPO companies. percentage of females at venture frms are in the single digits and that female and ethnic- The pre-IPO time frame has already minority entrepreneurs are signifcantly less likely to raise venture capital than white males. been extended for the Ubers, Warby As the NVCA task force has looked at diversity in the venture capital sector, ideas it has Parkers and dozens of other so-called come up with so far include the creation of “affnity networks” across venture frms so that technology unicorns, but Seth Merrin, women could talk to women in other frms if there was no one to talk to in their own frms. the founder and CEO of Liquidnet, said he expects to expand even wider the Also being considered are the insertion of language into term sheets, the legal pool of buyers of capital and companies documents companies use when they raise money, to encourage hiring a diverse who sell those shares. Roughly 150 workforce, and to have venture frms hire diverse interns. of the 800 institutional investors that trade in his dark pool have said they would weigh investments in late-stage in prices could present an interesting running; 650 outside mentors; and private companies, Mr. Merrin said. opportunity for managers to benefit from 45 corporate partners. The Hattery While Fidelity Investments, Wellington this market dislocation,” according to will continue to operate under its own Management Co. and T. Rowe that investment blueprint. Private equity brand name in San Francisco. Tactically, Price Associates have been active made up 8.9% of the systems’ portfolio 1776 companies will be able to work at participants in this market, Mr. Merrin as of Feb. 28, down from 9.2% as of offices in The Hattery and with design said many of his clients have never June 30, 2014. South Carolina has a and user experience experts there when done a private deal. Liquidnet will seek 9% target allocation to private equity. they spend time in San Francisco, to do this by conducting something The Columbia, S.C., pension fund has fundraising, recruiting or expanding their of a scaled-back roadshow so their stressed the need for caution as it dials businesses there. investors can see a private company’s up pacing targets, especially as investors financials. Mr. Merrin said companies are running into heavy competition will be able to choose their investor to get into the most favored funds. CUNY Gets Green Light base, and his clients – the institutional The City University of New York’s investors – can have a simplified way to endowment got the green light to look at potential investing opportunities. 1776 Buys The Hattery invest in private equity for the first time, For this, Liquidnet will charge a fee The Washington startup incubator and after trustees approved a 10% target ranging from 2% to 6% of the size of seed fund 1776 is expanding to San allocation to the asset class out of the fund raised. Francisco through the acquisition of the university’s $250 million portfolio. startup studio The Hattery in a cash CUNY’s endowment hasn’t previously and stock deal, according to 1776 invested in private equity, said two Flagship Signs Partnerships co-founder Evan Burfield. Mr. Burfield people familiar with the matter. As a Flagship Ventures, which is ramping declined to disclose a price. He said smaller entrant to the market, CUNY is up its company-creation efforts through the deal was structured to “align the likely to find it harder getting access to a new, $537 million fund, has teamed Hattery team with ours around long- the most favored private equity funds up with three corporations that could term success” for the quickly-expanding compared with larger endowments, be helpful to the firm as it creates incubator, seed fund and the startups it one of these people said, adding that biotechnology, nutrition and agriculture helps. As part of the deal, The Hattery’s the public university will build up its startups. Flagship, which invests in co-founders Josh Mendelsohn, Joshua exposure gradually and not force its health care and sustainability, creates To and Luis Arbulu will be joining investment pace. The university began a number of its portfolio companies 1776 as strategic advisers. With the deliberating changes to its portfolio mix through its Flagship VentureLabs acquisition of The Hattery, 1776 reports earlier this year, this person said. The group. The firm has teamed up with that it has 1,200 startups in its global move into private equity is part of efforts AstraZeneca PLC, Nestlé Health network; 38 full-time employees who by CUNY to diversify its investment Science and Bayer CropScience help them day to day and keep the portfolio and grow the endowment. to gain insights from executives and 1776 co-working spaces and events Cambridge Associates, the investment research and development officials Private Equity Analyst 11 news June 2015 when it is in the early stages of forming growing enrollment as the school companies. Through these partnerships, adds two new residential colleges. all three corporations have invested in Flagship’s new fund, its fifth, which closed in March. The collaborations add LPs Can Exit Gun Maker Stakes to an existing relationship with Merck & Cerberus Capital Management told Co. Flagship’s corporate partners don’t its investors that it has created an have any rights to invest directly in the avenue for them to sell their stakes in firm’s portfolio companies or to strike a gun maker the private equity firm has deals with them, but they do get a close been under pressure to divest from look at the Flagship’s company-building since the Sandy Hook school shooting process and an opportunity to offer in 2012. Cerberus sent a letter to its value, including debt, was about $880 guidance to the firm. investors, which include pension funds million, the person said. The New York and endowments, telling them that it has Times reported earlier on Cerberus’s separated Remington Outdoor Co., the letter to its investors. Cerberus tried VCs Support Box Platform maker of Remington and Bushmaster to sell the company at the urging of Two Silicon Valley venture capital firms, rifles formerly known as Freedom Group its investors, including the California Bessemer Venture Partners and Inc., from its funds and will allow any State Teachers’ Retirement System, Emergence Capital, have commit- investor wishing to cash out of the after a Bushmaster rifle was used by ted up to $20 million each to invest in company to do so, according to a person Adam Lanza to kill 20 children, six staff companies that are leveraging technol- familiar with the letter. Remington will members and himself at the Sandy Hook ogy from cloud-storage company Box use the proceeds from a 2013 debt sale Elementary School in Newtown, Conn. n Inc. Both firms previously invested in to pay investors who choose to divest Box, the users of which store and share their stakes, the person said. Cerberus Send press releases to VWEditor@ files in the cloud. Box, which has been said in the letter that the company’s DowJones.com trying to create an ecosystem of Box apps, announced new technology that makes it easier for developers to create applications that run on Box and can be accessed with either desktop or mobile devices. Several companies announced integrations with Box, including the iPhone app Tipbit, which lets users save attachments or emails directly in Box, and K2, which lets users build applica- tions that include forms and workflows from within Box. Box went public in January and has a market cap of about $2.15 billion, down from about $2.7 bil- lion after the company’s first day of trad- ing on the New York Stock Exchange.

Schwarzman Gives to Yale Yale University announced a $150 million gift from Blackstone Group co- founder, Chairman and Chief Executive Stephen Schwarzman to establish a new center for cultural programming and student life. This is the second- largest gift in Yale’s history and among the biggest that any university has received this year. “My hope is that the Schwarzman Center will serve as the crossroads for the campus, but also place Yale at the crossroads of the world,” Mr. Schwarzman, a Yale alumnus himself, said in a statement released by the school. The center is expected to open in 2020 and will help accommodate the Ivy League school’s 12 Private Equity Analyst June 2015 news

u Levine Leichtman Capital Partners has added two Comings & Goings managing directors. John O’Neill, a former partner at Graphite Capital, will oversee the firm’s London office and lead its efforts u Carlyle Group is becoming in seeking investment opportunities throughout the U.K. and both a destination and a jumping-off Ireland. Robert Hays, who was director of investor relations at point for executives coming from H.I.G. Capital, will serve as co-head of investor relations. and going to large corporations. The private equity giant has brought on u Rally Ventures brought on Art Coviello, the former Mike Duke, the former chief executive executive chairman of EMC Corp.’s RSA security division, as of Wal-Mart Stores Inc., and José a venture partner to expand the firm’s portfolio of enterprise E. Almeida, former chief executive security companies. He has been a member of Rally’s Tech of medical supplies maker Covidien Partners program since the firm was founded in 2013. PLC, as operating executives. Meanwhile, Michael J. Cavanagh, u Five staff members have left or are leaving Change who left J.P. Morgan Chase & José E. Almeida Capital Partners this year, after its ambitions to raise a new Co. for Carlyle last year, is joining fund stalled last fall. Among them are Chief Financial Officer Comcast Corp. as chief financial Andrew Wood, who left in January, according to a filing with officer after less than a year as co- Companies House. Emma Fava, Change’s former head of president and co-chief operating investor relations, left this year, according to a person familiar officer at the private equity giant, with the matter. Marco Sebold, a former managing director, is and Carlyle Managing Director due to leave in May. David A. Heilbrunn is joining Fifth Street Asset Management Inc. as a u VC ROUNDUP: MPM Capital managing director. hired Gregory Sieczkiewicz, a lawyer with expertise in intellectual u Stuart Bernstein, global head property, away from Flagship of the venture capital as well as the Michael J. Cavanagh Ventures as a managing director… clean-technology and renewables Obvious Ventures added energy- units at Goldman Sachs Group Inc., is leaving the firm. A industry executive Andrew Beebe Goldman Sachs spokesman declined to discuss reasons as a managing director to focus on for Mr. Bernstein’s departure. Christopher Buddin will step clean-tech and renewable-energy in to lead the clean-tech group, and Ken Hirsch will take on startups…Jeff Rowbottom, a the venture capital role after Mr. Bernstein departs. Kohlberg Kravis Roberts & Co. executive who heads capital markets Gregory Sieczkiewicz u Seeking to help its portfolio for North America, is leaving the companies better navigate legal firm for health care-focused venture firm Pontifax Group… gray areas, Andreessen Horowitz Kevin Thau, a former Twitter Inc. executive who was chief has hired former Facebook Inc. operating officer at search startup Jelly Industries Inc., joined General Counsel Ted Ullyot to the Spark Capital as a general partner…Ganapathy “Gani” newly created position of partner of Subramaniam, former chief executive of Cosmic Circuits Pvt. group policy and regulatory affairs. Ltd., joined Walden International as a venture partner. By adding Mr. Ullyot, the firm said, it aims to create a series of ongoing u LBO ROUNDUP: Golub Capital hired Chip Cushman, discussions with policy makers to most recently a managing director at GE Antares, as educate them about the various a managing director in its midmarket lending group… technologies being created. Ted Ullyot BlueMountain Capital hired Tripp Lane, a senior deal maker at Apax Partners, to push into European distressed u Meanwhile, TPG Capital’s general counsel, Ronald debt investments…Gregg Kaplan, founder and former CEO Cami, is leaving the firm after five years as its top in-house of Redbox Automated Retail LLC, joined Pritzker Group lawyer. Mr. Cami has agreed to stay on at the firm while it Private Capital as an operating partner for its services searches for a replacement and to help with the transition. team…Harjinder Johal, Darwin Private Equity’s head of “I made the decision that I wanted to pursue new opportunities fundraising and investor relations, has left the firm, according that I’ve been approached about and I am looking forward to public filings…Joe Rodgers, a former managing director to new challenges,” Mr. Cami said in an email. Mr. Cami at KPMG Corporate Finance LLC, joined Monroe Capital hasn’t disclosed further details about his plans. as a managing director heading the firm’s southeast region group…Inflexion Private Equity hired Carl Wormald, u Saguna Malhotra, Stanford Management Co.’s formerly a director at LDC, as a partner in its Manchester, managing director of private equity, will join Adams Street England, office to focus on investment opportunities in Partners as a partner and member of its investment team. the region…Frazier Healthcare said Chris Karkenny, an At Stanford Management, Ms. Malhotra was responsible for executive with Apria Healthcare Group Inc., joined the firm’s managing Stanford University’s private equity portfolio. growth buyout team as an operating partner. n Today’s Private Fund Toolbox…

Serious fund management tools Business is good. Fund commitments are rolling in. Deal flow is strong. Finance is keeping up. Investments are growing... or not. Now is the time to implement Relevant EquityWorks. Why? To effciently scale your operations.

Discover Relevant EquityWorks Professionals accomplish more with our productivity apps for Windows, Mac and iOS. Fund Raising & Investor Relations Deal Management t
Raise money and feld LP inquiries Contact Management / CRM FRONT OFFICE t
Investigate deals and monitor investments BACK OFFICE t
Administer funds, manage the portfolio and LP Portal Fund Portfolio generate quarterly reports Administration Management Monitoring Portal t
Provide end-to-end reporting to management Accounting System i/f

Give your team the tools it needs to handle more volume, with much less effort.

Explore our solutions Every imaginable type of private fund can be modeled with Relevant EquityWorks, including Private Equity, Real Estate, Specialized and Alternative Investment.

Join Relevant for a webinar or ask for your own Internet Demo Then take our diagnostic, The EquityWorks Challenge, to identify bottlenecks that can be resolved by our solutions. www.relevant.us 14 Private Equity Analyst June 2015 analysis Beyond Yale: Small Endowments Embrace PE With Their Own Models Managers of some of the smallest university endowments are embracing private equity as they seek higher returns amid an environment of low interest rates and slow growth. But rather than mimic portfolio management models popularized by some of the nation’s largest endowments, most notably Yale University, some of these smaller players prefer to carve their own path to private equity.

By DAWN LIM endowment. “I’m quick to say we’re not trying to be Yale, Harvard or Notre Dame,” he added. Abilene Christian Two decades ago, University took a Abilene Christian University’s endowment has invested page from the playbook of wealthier colleges and introduced about 20% of its portfolio in private equity – including private equity into its $75 million endowment. buyouts, credit and venture capital – another 10% in private energy funds and an additional 10% in direct energy assets. The Texas private university now oversees a $376 million endowment, 72% of which is invested in alternatives, an Creating their own twists on the investment models of asset allocation more commonly associated with much their large Ivy League peers, particularly Yale, smaller larger endowments and those in the Ivy League. The players like Abilene Christian University increasingly are university generated 11% annual net gains in the 10 years hewing their own paths into private equity and other ended June 30 of last year, matching Yale University’s, alternative assets. Along the way, some are proving they beating Harvard University’s and surpassing the average don’t have to be a large endowment with an elite in-house 7.1% returns of North American endowments over the same investment team to build a deep private equity footprint period that was captured by the National Association of and score comparable returns. College and University Business Officers and Commonfund. The private equity push by smaller players comes with its “I hear a lot of different definitions on what is the share of risk and particular challenges. Smaller endowments endowment model. If you look at it as a highly diversified are more likely to be disadvantaged than private equity portfolio across nontraditional and traditional assets, then investors over $1 billion in size. They often have fewer we embrace that,” said Jack Rich, the chief investment resources to support the staffing needed to thoroughly officer at Acimco, the investment company set up to run the perform due diligence on funds, as well as to meet reporting and auditing demands. As a result, they often must rely on funds of funds and advisers for access to the asset class, which adds an extra layer of fees. If they are taking a more U.S. Endowments Drawn to VC, Buyouts, hands-on role, they also may be writing larger check sizes Funds of Funds to build clout with managers, which may make them more Percentage of Endowments Interested in Strategy vulnerable if a fund falters.

80% 74% Swensen’s Endowment Model 64% Their approach to building private equity portfolios can differ 60 58% from portfolio management theories popularized by David 50% Swensen, Yale University’s chief investment officer, whose 44% ideas have come to be known as the endowment model, or 40 36% the Yale model. He advocated a diversified portfolio with a higher proportion of illiquid assets – but only for those with 22% 21% superior access and the resources to choose investments. 20 The endowment model came under criticism during the economic downturn that began in 2007, when a series 0 of larger institutions were hit by illiquidity issues after exit markets froze. The realization that private equity returns will Venture Buyout Growth Natural Capital Funds of likely underwhelm if one lacks top-quartile managers also Funds Distressed Mezzanine ResourcesSecondaries prompted some endowments to reevaluate their private As of May 18. Dataset comprised 492 U.S.-based institutions. Source: Preqin Ltd. equity exposure. Private Equity Analyst 15 analysis June 2015

“The combination of the illiquidity and the uncertainty of if doing so means paying additional costs associated with the return profile means the picture is not as clear as it funds of funds or advisers. In a low-interest rate and low- once was,” said William Jarvis, managing director of the growth environment, they may have few other choices. Commonfund Institute. “Organizations are continuing to try to assimilate the full meaning of what the endowment Institutions with between $25 million and $100 million in model requires.” endowment assets grew out their private equity allocations in the past year, according to data on the dollar-weighted Although it expects to deploy more capital directly going average allocations of North American higher educational forward, Abilene Christian University has tapped funds of institutions from Nacubo and Commonfund. funds in areas where it has found access more challenging, such as venture capital. Swensen’s teachings stress the Private equity allocations for institutions in that group importance of active management and warn of the risks increased by a modest one percentage point to 3% in the of tapping funds of funds. Mr. Rich – even as he runs year ended June 30, 2014. In contrast, larger players’ private a portfolio he sees as more concentrated by managers equity allocations fell, thanks to a large volume of cash from than bigger peers – believes asset allocation, rather than portfolio company exits that flowed back into their portfolios. manager selection, is the primary driver of returns for Abilene Christian University. “The question of whether private equity is relevant for smaller players is coming up again in the endowment community,” said Ken Redd, Nacubo’s director of research A Small Endowment PE Push and policy analysis. “There is a sense that the economy Successful stories from endowments like Abilene Christian has gotten better, leading people to think that if you have University have encouraged other small endowments to a good general partner, you can find the next Google and continue to tweak the Yale model to suit their goals, even Facebook in its infancy.” 16 Private Equity Analyst June 2015 analysis

The University of Maine System, which runs a $264.4 Resource Crunch million endowment and trust pool, decided in 2014 to build out a new 2% private equity allocation. Its The pain of being smaller became palpable for the Ball portfolio had no allocation to private equity at the end State University Foundation in 2008 and 2009, when it of 2013. NEPC, the investment consultant, said private wanted to take advantage of dislocations in the aftermath equity would provide the system “potential for higher of the economic downturn but lacked the resources and returns compared to traditional domestic equity” when confidence to jump on opportunities when they were most it recommended the move. The system is growing the cheaply priced. portfolio by committing capital to Landmark Partners, in a move that will help it plug gaps in vintage years. “As the market was going through a dislocation, there were opportunities we couldn’t take advantage of,” said The City University of New York got the green light this Tom Heck, chief investment officer for Ball State University year to invest in private equity for the first time and ramp Foundation’s $200 million endowment. “If we were a large up its hedge fund investments, moves designed to diversify endowment with internal staff, we’d have been able to the portfolio’s asset allocation and grow the endowment. A be lot more nimble.” The university didn’t need to dip into smaller entrant to the market with $250 million in assets, the endowment to fund operations or sell its fund stakes, CUNY is likely to find it harder getting access to the most putting it in a slightly better position than others. favored private equity funds and will lean on its consultant, Cambridge Associates LLC, for recommendations on which Ball State University, which in 2011 hired Perella firms to invest with, said a person familiar with the matter. Weinberg Partners as a discretionary consultant for the endowment, invests in private equity through commingled Yale’s Mr. Swensen long criticized the use of consultants vehicles managed by the firm. Its endowment portfolio is and fund of funds to access private equity, questioning about 50% allocated to alternatives, with 30% invested in whether the profit motives of these entities were aligned private assets. It targets roughly 8.5% in annualized returns with those of their limited partners and whether they have toward its objective of meeting a 4.5% spending rate. sufficient access to the best managers. But as the market gets increasingly crowded and access to good managers “We believe in the endowment style of investing as one tightens, more endowments may find that they need fund- that embraces wide diversification and an acceptance of of-fund managers and other intermediaries, with their illiquidity,” Mr. Heck said, later adding, “I think it’s possible access to a stable of managers. for a smaller institution to participate in the same private equity portfolio as a large endowment if they can find the “To presuppose that it’s possible to select underlying right channel.” funds directly in some way that overcame 85 to 100 basis points of fees of a fund of funds, that’s hard to do at $250 Mr. Heck said the additional layer of fees is justified as it million,” said Travis Pruit, the U.S. business leader for not- is still less than what it would cost the school to build an for-profit outsourced chief investment officer services at endowment portfolio on its own. Passive investing is not consulting firm Mercer LLC. necessarily an easier option, he added, because institutions that seek to tactically pick segments of the exchange-traded funds market are still required to make “active and ongoing” decisions. Small Endowments Want In on Private Equity Average Allocations to Private Equity for North American Endowments, As advisers and consultants continue to provide the for the Year Ended June 30 of the Given Year smallest endowments with access to private equity, the asset class continues to gain mainstream acceptance. 15% >$1B 12% “It will be interesting to see over time whether aggregate investment capital from smaller players through outsourced $501M- 8% CIOs, funds of funds and consultants will impact the $1B 7% environment for large endowments and dilute the opportunity set,” said Mr. Heck. $101M- 6% $500M 5% If that happens, it could test how committed these small $51M- 2% endowments are to the investment models they have $100M 3% adopted.

2% $25M- “If the amount of capital flooding into private equity results $50M 3% in disappointing returns because entry prices are being bid 0% 3% 6% 9% 12% 15% up, then institutions who didn’t understand the asset class may decide to leave,” said Mr. Heck. “The institutions who 2013 2014 have the long-term horizon and more disciplined approach Data is dollar-weighted. Source: NACUBO-Commonfund Study of Endowments will remain and benefit.” n Private Equity Analyst 17 analysis June 2015 Pensions Are Still LP Top Dogs, but Wealthy Investors Gain Ground

By LAURA KREUTZER owned by Dow Jones. Public pension funds, long the mainstay of private equity fundraising, maintained a steady particularly public ones, flow of commitments or, in some cases, even increased Pension plans, remain the biggest their commitment pace in 2014 to keep up with the cash source of capital for private equity firms in fundraising mode, they were receiving back from their GPs. even as shifting demographics put increased pressure on defined benefit schemes. Not surprisingly, public pensions accounted for about 31% of the capital raised by firms in this year’s survey sample, That is just one of several takeaways from the latest edition roughly on par with last year’s survey and still the largest of the Dow Jones Private Equity Analyst Sources of Capital, an annual survey of placement agents and general partners that measures where capital came from for the prior year’s commitments. Breakdown of Fund Types Total Capital Raised: $32.42 Billion The capital accounted for in this year’s survey sample – about $32.42 billion – fell short of prior years, partly due to a 1% 1% lack of participation by many of the largest buyout firms. That Infrastructure makes the results more heavily weighted to subasset classes, 3% Secondary funds such as secondary funds, infrastructure funds and private 4% 7% Other buyout debt. The smaller survey sample could allow a small group of 28% outliers to have a bigger influence on the data results. Nonmezzanine private debt 8% Co-investment funds or funds investing directly in deals That said, our analysis focuses on data points with the strongest sample sizes and where we felt confident the 9% Distressed equity or debt funds data illustrates broader trends in the market. Mezzanine Other 14% 24% Investors eagerly deployed capital back into private equity Growth capital funds in 2014, thanks to a steady flow of distributions Venture capital in 2013 and 2014. U.S. private equity fundraising hit $266.2 billion in 2014, a roughly 12% increase over 2013, Fund count: 71. Numbers do not add to 100% due to rounding. according to Dow Jones LP Source, a data provider also Source: Dow Jones Private Equity Analyst Sources of Capital Survey 18 Private Equity Analyst June 2015 analysis

With yields relatively low in more traditional asset classes Capital Source by Investor Type (All Funds) such as fixed income, wealthy investors have sought access to higher performing, albeit riskier, asset classes such as 2% 2%1% 2% infrastructure, oil and gas, and private equity. 2% 3% Despite the logistic challenges associated with 4% aggregating many small commitments from an investor 31% 6% class that tends to desire more liquidity than do institutional LPs, more private equity firms are eager to tap Public pension funds 6% into this investor class. In the past two years, Kohlberg Other 7% Kravis Roberts & Co. and Carlyle Group each formed Insurance companies investment vehicles designed to provide accredited 15% Corporate pension funds 10% investors with access to their funds. Endowments/Foundations 10% Sovereign wealth funds “They aren’t the biggest [participants] in private equity, but 2015* Wealthy investors/Feeder funds they have more capital than the pension funds,” said Paul 1% Family offces Ward, a managing partner at Pantheon. “It’s a very big 5% Funds of funds 9% market and a big opportunity.” 1% Discretionary advisers 1% 32% GP contributions Although more limited partners are reducing the number 6% Bank/fnancial services of general partner relationships in their portfolios, private 3% Union pension funds equity firms in our survey sample managed to raise some 5% Corporations directly 45% of their capital from new investors, roughly on par with last year’s survey and ahead of survey respondents 12% 8% in 2013. The capital flowing back to LPs has given 6% them a bit more flexibility to fill out specific niches 5% 6% in their portfolios where they remain underallocated, 2014 although placement agents said the bar for adding new relationships remains high. *Numbers do not add to 100% due to rounding. Source: Dow Jones Private Equity Analyst Sources of Capital Survey “The standard limited partner has a fairly robust portfolio, so the new GPs have to be differentiated in some way,” capital contributor to the asset class. Meanwhile, corporate said Alan Pardee, a managing partner at Mercury Capital pensions chipped in another 10% of the money raised, up Advisors, adding that his firm has seen investors strike new from 6% in last year’s survey sample. GP relationships in the energy sector, metals and mining, farmland and infrastructure, as well as in buyouts. Defined benefit plans, both large and small, face growing liabilities as their beneficiaries age. Many have expanded U.S. investors remain the strongest source of capital for their allocations to private equity as part of an overall push fundraising GPs in this year’s survey, contributing more into alternative assets aimed at bulking investment returns than two-thirds of the capital raised, roughly on par with to try to meet those liabilities. last year’s survey. Moderate yet steady economic growth

“We’ve seen a real trend on the smaller end toward aggregation of smaller plans,” said Amanda McCrystal, global head of marketing and communications at Pantheon, New LPs vs. Prior LPs (All Funds) a global alternative asset manager. “As a group, they can get the purchasing power and the discounts associated 100% with larger amounts of capital.”

Some of the smallest investors also continue to grow 55% 52% 66% in importance to private equity fundraising. Wealthy investors and feeder funds accounted for 6% of the money raised in our survey sample, while family offices contributed 4%. However, the actual percentage of capital coming from wealthy individuals may be even 45% 48% higher, given that a number of the firms indicating they 34% raised capital from “other” sources listed accredited investors or high-net-worth individuals in the “other” 0 2015 2014 2013 category. Investors that fell into the “other” category contributed 15% of the capital raised by firms in this New LPs Prior LPs year’s survey sample, up from 8% in last year’s survey. Source: Dow Jones Private Equity Analyst Sources of Capital Survey Private Equity Analyst 19 analysis June 2015

midmarket funds are finding fundraising quite easy. They Capital Source by Geography (All Funds): Non-U.S. LPs can raise funds locally and don’t have to travel that far. “

1% Although Western Europe has seen a decline in importance as 3%2% a capital source, Asian LPs continue to grow in prominence, a 4% trend that has been building over the past several years. Asian 5% 28% investors, excluding the Japanese, contributed some 28% of 9% the capital raised from non-U.S. investors in this year’s survey, up from 22% in last year’s survey.

Asia (excluding Japan) 13%7% Korea Investment Corp. as well as China’s CIC Canada Investment Corp. and State Administration of Foreign 19% Western Europe Exchange are some of the Asian institutional investors 16% Middle East ramping up their private equity programs in recent years. United Kingdom 2015 Latin America Ted Ughetta, a partner in the private equity and investment 1%3% Australia funds practice at law firm Nixon Peabody LLP, said 12% Other participation by Asian LPs in the private equity market has 22% Eastern or Central Europe expanded beyond the large sovereign wealth funds to 3% include more corporate LPs and family offices. 2% Japan “They’re following groups like CIC and learning from the 15% 12% experiences of the large sovereign wealth funds,” Mr. Ughetta said. “We’ve seen that from certain Chinese 7% corporations that are looking to set up offices in the States 24% to be more active participants.”

2014* Latin American LPs also expanded their share of the pie, contributing 5% of the capital in this year’s survey sample, *Numbers do not add to 100% due to rounding. up from 2% in last year’s sample. Although differences in Source: Dow Jones Private Equity Analyst Sources of Capital Survey survey samples may be at play, participation in private equity from pension systems in Colombia, Peru and Chile has in the U.S., combined with a strong dollar and robust continued to grow in recent years. returns flowing back to U.S investors from their underlying private equity managers, all likely contributed to the results. After an active 2014, it remains to be seen how many of However, the heavier weighting of U.S. managers in this these trends will sustain themselves through the coming year’s survey sample also likely influenced these results. year, although so far fundraising momentum still seems fairly robust. As the year unfolds, however, some investors may Among those firms that raised capital abroad, the pause to reassess the capital that they have deployed. percentage that they raised from LPs in Western Europe declined for the second year in a row. Western Europe “There seems to be a bit of a digestion process taking place accounted for only about 16% of the capital raised from in the first quarter,” said Mr. Pardee of Mercury Capital. non-U.S. investors, compared with 24% of the capital in “Investors have done a lot of reups and they’re continuing to last year’s survey. The percentage of capital coming from do reups. [But] we’ve seen a few investment decisions slide Western Europe has steadily declined in the past several from quarter to quarter.” n years of this survey: In 2009, investors from Western Europe contributed more than 47% of capital raised by managers in a similar survey. Capital Source: U.S. vs. Non-U.S. Investors (All Funds) A relative lack of megafund managers participating in this year’s survey sample likely contributed to the decline, particularly as managers of small and midsize funds often have less need to raise capital abroad and fewer resources 34% 37% for funding overseas marketing campaigns. However, the U.S. Investors official implementation of the Alternative Investment Fund Non-U.S. Investors 63% Managers Directive, a raft of regulation that effectively limits 66% the ability of non-European managers to raise capital from European investors, is also likely to be a factor. 2015 2014 “At the margin, it’s definitely an influence,” Pantheon’s Paul Ward said of AIFMD’s impact. “The more successful [U.S.] Source: Dow Jones Private Equity Analyst Sources of Capital Survey 20 Private Equity Analyst June 2015 analysis Spring Cleaning: PE Firms Exit Portfolio Companies at Faster Pace

Alistair Watson, a senior investment manager at Aberdeen Asset Management, said it was natural in the current ebullient exit market for holding periods to decline to more “normalized” levels. “The inventory of precrisis, peak market transactions continues to reduce through exit activity, and these deals have typically had longer hold periods due partly to the ‘lost’ years endured in the financial crisis.”

Mr. Watson added there had been “some attractively priced deals completed in the 2009-to-2012 period, which have performed at or above plan through the recovery, and managers are ready to harvest these investments in the strong current exit environment.”

By JENNIFER BOLLEN and AYESHA JAVED Some private equity firms have taken advantage of the strong exit market to sell their portfolio companies after shorter- firms are exiting their than-average hold periods. In March, CVC Capital Partners Private equity portfolio companies earlier agreed to sell London-based online payments company for the first time since the economic downturn, amid the Skrill Ltd. for about €1.1 billion, less than two years after strongest exit environment in years. investing in the business, in a deal that valued Skrill at €550 million. CVC also sold gym chain Virgin Active Ltd. in April The length of time buyout firms held portfolio companies fell after less than four years of ownership. The deal generated to an average of 5.5 years as of April 23, according to data a return of more than two-times CVC’s investment and an provider Preqin Ltd., the first decrease since 2008. Preqin internal rate of return approaching 30%. said the average length of time firms held on to investments has been rising in recent years to a record high of 5.9 years “As investors, we would encourage managers to take for businesses sold in 2014, compared with an average of advantage of attractive exit environments,” said Mr. Watson, 4.1 years in 2008. “but always to balance current expected exit value against the future growth and value potential of portfolio companies “The timing stretched because the volume of large-cap and the associated risks.” deals done in 2006 and 2007 got stuck, effectively, in portfolios, so that provided the longer hold,” said Graeme He added that portfolio companies could “undergo Gunn, a partner at U.K. fund-of-funds manager SL Capital significant positive change and operational improvement in Partners. “The current positive market environment, a three- to five-year period,” which he said was considered quantitative easing in Europe and higher liquidity in the U.S. an “optimal” hold period. n have allowed private equity funds to reduce the time to exit.”

European buyouts this year had the longest average hold period, hitting an average of 5.7 years, compared with 5.3 Buyout Firms Starting to Sell Portfolio Companies years for companies in North America. More Quickly The shortened investment periods come amid a surge in Global Average Holding Period, in Years 5.8 5.9 confidence in the exit markets. Last year, private equity exits 6 yrs. 5.5 5.3 5.5 in Europe reached $142.5 billion, which was the highest 5.1 5 since 2007, according to data provider Dealogic Ltd. From 4.5 4.4 4.3 4.1 Jan. 1 to May 15 of this year, there have been 158 private 4 equity exits in Europe worth $37.6 billion. 3

“We lost two years of activity in the financial crisis when 2 nothing happened,” said Mr. Gunn. “That is becoming a distant memory now, but during this time we had no investments or 1 exits...Today is a good exit environment across the board, so a 0 lot of the funds are taking the opportunity [to exit], as you don’t 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* know when the window will close.” *As of April 23. Source: Preqin Ltd. Private Equity Analyst 21 analysis June 2015 Amid Tepid Returns, LPs Approach Emerging Markets Cautiously

By HILLARY CANADA Global Environment Fund President and Chief Executive Jeffrey Leonard also cited pain in Brazil, adding that raising private equity is a Brazil-only fund is “challenging these days.” Emerging markets starting to lose a bit of its luster for some limited partners as returns fail to But he added that tough times may be precisely the reason measure up to the risks. to raise such a fund as entry valuations become lower. Mr. Leonard likened maneuvering in difficult markets to his At the 2015 Global Private Equity Conference hosted last experiences mountain climbing. month in Washington, D.C., by the International Finance Corp. and the Emerging Markets Private Equity Association, “Our rule of thumb was to follow the storm,” he said. “As several institutional investors spoke of disappointing returns soon as we saw a storm lifting, that’s when we moved. So and other risks that accompany such investments, including when we reached the top, we had a clear sky ahead.” shaky currencies, unfriendly governments, corruption and slowing growth.

BlackRock Private Equity Managing Director Craig Payne said that in his firm’s core funds, the emerging markets allocation has trended down over time, partly because of performance. Out of 65 maturing emerging-markets funds raised in the 2005-to-2010 time range that his firm has backed, Mr. Payne said he could find only three that had returned two-times total value to paid in capital or more. Only one of the funds produced a net return of 20% or better.

“So either we’re doing a very bad job of selecting fund managers, or there is a systemic issue,” he added.

Other limited partners, including University of Virginia Investment Management Co. Chief Executive and Chief Investment Officer Lawrence Kochard and Peter Keehn, global head of private equity at Allstate Investments, said they take a very measured approach to such investments. Both adamantly opposed the idea of backing emerging-markets private equity simply as a means of portfolio diversification.

To get to the point of committing, Allstate needs to “see a compelling case for excess returns,” said Mr. Keehn. Despite the obstacles, limited partners, hungry for yield Performance isn’t the only issue weighing on emerging- in a low-interest-rate environment, haven’t abandoned markets managers. “When we look around the emerging-markets private equity. world, there’s not a lot to like,” said Cartica Capital Management Senior Managing Director Teresa Barger, “We had to move from an allocation view to a selection view,” citing slowing global growth as a major obstacle. said Travis Angevine, director of private markets at the Alfred I. DuPont Testamentary Trust. “You have to go and find the “The 2014 elections disappointed,” she said. Many countries manager that is doing something you haven’t seen before,” “reelected the bad old guys,” so they’re missing out on the he said, pointing to a manager his firm recently backed that is “reform momentum” that can bolster economic advances, focused on low-income housing in Latin America. she said. She pointed to the Philippines, India, Poland and Mexico as the “reformers,” where some action is under way. “We think there’s opportunity,” said Mr. Payne of BlackRock. Other promising nations have fallen short. “We’re not pulling back. There are not many places in the world where you can buy a lower middle market “Turkey made big leaps forward when they created policy business for less than six times [earnings before interest reforms in hopes of joining EU,” she said. “Sad to say, that taxes, depreciation and amortization]. In some parts of the has not continued.” developing world, that’s still possible.” n 22 Private Equity Analyst June 2015 analysis limited partners

Industry Data Despite Exits, PE Returns Disappoint

firms have described the In the short term, private equity had a difficult time keeping Private equity current exit environment as pace with the long-running bull market. Through Sept. 30, “biblical,” but that doesn’t mean the returns are heavenly. Cambridge Associates LLC’s one-year-returns benchmark for global buyout and growth equity funds was a net 15.9%, In fact, 96% of the 408 U.S. private equity executives polled compared with 19.73% returned by the S&P 500. in Deloitte LLP’s M&A Trends Report 2015 said the exits they made in the previous year fell short of targeted returns. Over the longer term, however, private equity outperformed, The survey included a total of 2,500 corporate and private generating a net 13.89% over a 10-year period, compared equity executives. with 8.11% for the S&P.

Three out of four respondents to the survey said they Mixed Bag on PE Exits anticipate the level of exits will remain high within the next 12 months. More than 60% said they anticipate the Of PE Industry Respondents: primary source of exits will be sales to strategic buyers. About 38% believed exits could come in the form of initial 100% 96% 96% 94% 89% public offerings. 80 A majority of these same executives believe 2015 will also 60 be a robust year for deals. More than half of the private 40 equity respondents anticipated closing at least five add-on acquisitions in 2015, and of those same respondents, 22% 20 believe they will make more than 11 add-on deals this year. n 0 Those Saying at Least Some Those Forecasting Average to Portion of Their Deals the Previous Very High Levels of Deal Activity Year Fell Short of Targeted Returns in brief 2015 report 2014 report European VC Regains Ground Source: Deloitte LLP Venture capital investment in European companies rose to its highest fgure since the third quarter of 2001, according Enticed by a receptive market for initial public offerings, as well to data from Dow Jones VentureSource. European companies as corporate acquirers seeking growth through acquisitions raised €2.6 billion in 345 deals during the frst quarter of and other private equity firms eager to deploy capital, buyout 2015, an increase of 41% over the amount raised during the shops have been exiting companies at a record pace, even fourth quarter of 2014 despite a 5% decline in the number after holding some businesses less than a year. of deals completed. Consumer services received the largest investment allocation during the frst quarter, gathering €1.3 Private equity firms world-wide generated some $428 billion through 103 deals, 50% of the total VC raised by billion from the sales and initial public offerings of 1,604 European companies during the period. companies last year, according to data provider Preqin Ltd.

Despite the vast volume of sales, return figures for the past Health-Care Startups Raise $3.9B two years have missed the mark for a substantial number of U.S. medical startups raised a record $3.9 billion in venture the deal makers polled by Deloitte. The economy was partly capital in the frst quarter amid rising investor interest in to blame for the missed return expectations. biotechnology, digital health and health-care services. The period’s health-care total surpassed the previous record of Barry Curtis, a partner at Deloitte M&A Services, said in $3.42 billion invested in the second quarter of 2014, according an email that the disappointment stemmed in part from to Dow Jones VentureSource. Driving investment in the sector “optimistic growth assumptions” firms had about the was a strong market for initial public offerings, increasing investments they made from funds raised following the confdence in the success of drugs in clinical trials and financial crisis that began in 2007. acquisitions by large drugmakers needing to replenish their pipelines. Biotechnology investment accounted for most of the Lower-than-expected growth in many sectors also may increase in venture funding, with investors pouring $2.14 billion have partially offset the high multiples businesses are into biotech companies, up 72% from the frst quarter of 2014. commanding, Mr. Curtis added. Private Equity Analyst 23 limited partners June 2015 Kentucky Retirement Systems Raises the Bar for PE as It Faces Funding Woes

By DAWN LIM Hit by staff turnover, the system sought a fresh start. Ending Altius Associates’ role as a private equity adviser after a the state’s failure to meet roughly two-year stint, Kentucky Retirement brought on Pinched by its pension contribution Pension Consulting Alliance in 2014, in hopes the new requirements, the Kentucky Retirement Systems is raising arrangement would allow the staff to more directly shape the bar for private equity as it looks to write larger checks to the portfolio around Kentucky’s funding challenges. fewer managers. As part of that effort, Kentucky Retirement, which has The Frankfort, Ky., system plans to make annual commitments backed funds from venture capital firms including of $130 million to $220 million to between three and five Institutional Venture Partners and Duff Ackerman & managers in the year ahead, a more tempered pace than it Goodrich, may scale back its investments to venture and had heading into 2008, when it was committing more than growth equity, out of concern it can’t generate stable long- $250 million annually. The term returns through the asset class. “The challenge is in pension investor, which has justifying locking up money in hope of a winner or two,” said Kentucky typically pledged $50 million to Mr. Peden. “We might keep a ‘baby toe’ in venture capital, $100 million to each fund, will but it has to be a compelling story.” Retirement now focus on commitments at Systems the larger end of that range. Kentucky Retirement, the largest buyout relationships of which include Leonard Green & Partners and Blackstone Group, Assets “We want to get to fewer plans to focus on smaller private equity funds where it can Kentucky Retirement manages and chunkier relationships,” have more clout as an investor. By targeting groups raising $11.55 billion in pension said David Peden, who funds of up to a billion dollars, it is hoping its general partners assets, of which 9.8% was in heads investments for some will face less competition than their larger peers. Kentucky private equity, as of March 31. $16 billion in pension and Retirement is also considering whether to make its first move It also oversees $4.19 billion in insurance assets. into private equity co-investments, in line with efforts to reduce insurance assets, of which 6.3% fees and forge more meaningful ties with managers. The was in PE. The target allocation to PE is 10% for both pools. Mr. Peden, formerly the director system recently got approval to co-invest in real estate deals. of fixed income, took the chief Key Personnel investment officer position last As it recalibrates its approach to private equity, KRS wants David Peden is the chief year following a rocky patch for to broaden the reach of its portfolio. It will also look into ways investment offcer and Bill the pension fund. Private equity to capture energy opportunities amid recent selloffs and Murnighan is acting director investments ground to a halt at will consider more global exposure for its portfolio, which is of private equity. Brent Kentucky Retirement in 2008 more than 90% invested in U.S. partnerships. Last year, KRS Aldridge recently became made its first private credit investment out of its fixed income director of real estate due to liquidity concerns during and real return assets. the economic downturn. When bucket, awarding a $125 million separate account mandate the pension system once again to Cerberus Capital Management to make senior secured Recent Commitments began making commitments to loans to midmarket companies. Across the broader portfolio, DB Secondaries Opportunities private equity in 2009, it had to the pension fund’s priorities continue to shift to pruning, Fund III LP, Cerberus Business tread lightly. rather than growing out, alternative exposures. Finance Lending Platform separate account. The funded status of its Kentucky Retirement is no longer as focused on expanding plans deteriorated as the its allocations to real estate, real return and absolute return state fell short on pension contributions. Kentucky has strategies after spending the last five years “in phase one of one of the worst-funded pension systems in the country, building out the alternatives portfolio,” Mr. Peden said. though pension reform measures passed in 2013 by the state legislature has raised hopes it can improve its funding As a new asset allocation review looms, changes to Kentucky status. One of the weaker plans administered by Kentucky Retirement’s portfolio are likely to be less drastic than they Retirement, the Kentucky Employees Retirement System’s were four years ago, when the system, looking to modernize pension plan for workers in sectors deemed “nonhazardous,” its mix, carved out a new absolute return sleeve and became posted that, as of June 30, 2014, it had only 21% of the more active in real estate, real return and hedge fund investing. funds needed to cover the obligations it owed. Critics also scrutinized the fees the pension fund was paying to “We’re going to be much more selective and will focus hedge fund and alternatives managers, putting pressure on on maintaining the strongest relations as we don’t feel Kentucky Retirement to focus on controlling costs. compelled to deploy capital now,” said Mr. Peden. n 24 Private Equity Analyst June 2015 fund news

General Partners: Buyout Spirits Capital Cheers On Millennials’ Taste for the New By AMY OR

not even vintage spirits It seems that stand the test of time, at least not among younger consumers.

“Blended Scotch is declining as aging boomers are consuming less. And they aren’t appealing to next generations, the Xers and the millennials,” said Todd Martin, a former president of Allied Domecq PLC’s North America York’s Bacchus Capital Management and TWT Investment division and founder of Daucourt Martin Imports LLC. “They Partners, of Ridgefield, Conn., seek investments in wine. aren’t interested in something with traditional heritage.” Although there are angel investors for hard liquor, private Spirits Capital Part ners, of Dallas, seeks to cater to these equity participation in spirits has been low. “It’s harder to changing tastes in distilled spirits. [build brands] in spirits as the consumption of spirits in bars is almost always in mixed drinks – not like beer or wine, Set up by Mr. Martin, in partnership with Chicago’s Silver Pine where you can finish a bottle or two in an evening,” he said. Partners, Spirits Capital is seeking to back emerging spirits brands that have a track record Still, Mr. Martin said, “most of the profit in alcoholic of attracting drinkers but need beverages is made in distilled spirits.” Spirits Capital capital to give them the extra push to bring their products to Spirits Capital writes equity checks of $5 million to $25 Partners markets throughout the country. million but believes the bulk of the opportunities occur in the The Firm $5 million-to-$10 million segment of the market, where new Founder Todd Martin set up “Millennials aren’t choosing brands are aplenty. Daucourt Martin Imports LLC, traditional brands that have an importer and distributor been around for 30 or 40 Spirits Capital, which funds investments in partnership with of French spirits to the U.S. years. Instead, they are Silver Pine on a deal-by-deal basis, made two investments market that launched brands finding brands that they can in April: Rum maker Real McCoy Spirits Corp. and Spud X-Rated Fusion Liqueur and call their own,” said Silver Partners LLC, producer of a vodka made from potatoes. Jean-Marc XO Vodka, both Pine founder and Managing sold to Gruppo Campari- Director Vincent Hemmer. Investments going forward will focus on the type of spirits that Milano Spa in 2013. millennials favor. “American craft whiskey is booming, including The Portfolio Data provider IBISWorld said bourbon and rye and, to a lesser extent, rum,” Mr. Martin said. Real McCoy brand of rum was in a January note that the based on the original recipes industry’s potential market size Mr. Martin and Mr. Hemmer’s partnership can be traced of Prohibition-era smuggler would get a lift from those born back to more than a decade ago, when the latter was with Bill McCoy. Spud Vodka, during the early 1990s baby Chicago firm GTCR. meanwhile, came second boomlet reaching drinking age in the 2015 Ultimate Spirits in the next five years. The pair said they tried to buy family-held spirits companies Challenge with 94 points. and portfolios of tail brands from larger spirits companies “Spirits are more popular but were deterred by the “unrealistic prices.” But with Spirits today than when these customers were born,” according to Capital’s strategy of scaling emerging brands, strategic buyers’ the memo. “Distilleries have begun to alter product mixes to ability to pay a premium for assets turns into an advantage. enhance the selection of milder ready-to-drink beverages to capture this audience’s interest.” Mr. Martin said Spirits Capital views major spirits companies, which need to supplement existing brands’ slow growth by Financial investors have participated in various segments of adding newer brands to the mix, as a natural exit channel. the alcoholic beverage industry. Kohlberg Kravis Roberts “Strategic buyers are able to rapidly broaden a spirits com- & Co. and Affinity Equity Partners, for example, backed pany’s distribution as they can run it through their own network South Korean brewer Oriental Brewery Co. in 2009 and to substantially grow revenue,” said Mr. Hemmer. “They also sold it to Anheuser-Busch InBev NV last year. Firms like New benefit from material synergies throughout the cost structure.” n Private Equity Analyst 25 fund news June 2015

General Partners: VC Menlo Ventures Stays Fresh With $400M for Fund XII By DEBORAH GAGE Entrepreneurs aren’t just looking for firm brands anymore, Mr. Siegel said, “but for individual people who are really generational transitions can be smart about my market, my business and have interesting Navigating difficult for venture capital firms, things to say and [to] add value on my board.” whose business is generally based on nurturing networks developed by small partnerships in which the loss of a Menlo will continue in Fund XII with other practices that single person could be critical to the firm. worked in Fund XI, the partners said. Although they declined to comment on returns, Fund XI has done well, But Menlo Ventures has cultivated some best practices as according to a summary published by limited partner it approaches its 40th anniversary next year and begins to Washington State Investment Board, with a net internal invest its 12th fund. rate of return of 81.6% as of Sept. 30.

Menlo closed the new fund in The firm will make about half of its investments from Fund XII Menlo Ventures April at $400 million, the same in enterprise companies and half in consumer companies, size as its previous vehicle, instead of favoring enterprise investments as it did in the The Firm and has begun to pass the past. It is also making a more concerted effort to reach out Based in new larger offces responsibility for investing it to to media rather than working to stay out of the news. on Menlo Park, Calif.’s storied a new generation of partners. Sand Hill Road, Menlo Ventures The firm is tweaking its seed program as well, carving about continues with six managing Two of its six managing $15 million out of Fund XII, compared with $20 million out directors, including Doug directors – Doug Carlisle, who of Fund XI, and making larger investments in about half as Carlisle, Shawn Carolan, Venky joined Menlo in 1982, and John many companies, which will mean about 30 investments Ganesan, John Jarve, Mark Siegel and Pravin Vazirani. Mr. Jarve, who joined in 1985 – will instead of 60. Carlisle and Mr. Jarve will retire begin the process of retirement after this fund. Menlo hopes to after this fund, following in The changes reflect what Mr. Siegel called “a glut of seed fll the two partner slots from the footsteps of founder H. companies,” not all of which will be able to raise follow-on within, the frm said. DuBose Montgomery, who funding, and a more thoughtful approach to seed investing started the firm in 1976. by Menlo. The Fund Menlo Ventures XII LP closed Entrepreneurs will be offered milestones to keep them on in April at $400 million, the Retirement at Menlo doesn’t same size as its predecessor mean disappearing onto the track, and if the startups don’t work out, “we will be sure to fund, which closed in 2010. golf course, however. The idea keep those people in the family,” he said, offering space in These two funds are a third or is to be gracious and generous Menlo’s larger new office on Sand Hill Road so entrepreneurs less the size of Menlo’s ninth and provide continuity for can try to turn their technology into something new. and 10th funds, which closed the firm’s younger partners, at $1.2 billion in 2005 and according to General Partner Seed companies also sometimes get acquired, said $1.5 billion in 2000. Mark Siegel. Managing Director Venky Ganesan, and “we figure these Recent Deals entrepreneurs will be doing this again.” In April, Menlo counted seven At Menlo, retirement means exits in eighteen months, staying active in the firm’s Menlo also plans to continue adding entrepreneurs in including those of Dropcam operations for another three residence who can incubate companies at Menlo and Inc. (acquired by Google or four years, keeping an expects to double its venture partner numbers to about Inc.’s Nest Labs for $555 office and continuing to sit on a half dozen, Mr. Siegel said. These are people like Jim million), EdgeCast Networks boards, while cutting back on Dawson, the former chief sales officer of Fusion-io Inc. (now Inc. (acquired by Verizon economic interests in the firm part of SanDisk Corp.), and Avery More, the founder and Communications Inc. for to make room for new people. former chief executive of CompuCom Systems Inc., who $395 million) and Flurry Inc. have long track records in the industry and can help Menlo (acquired by Yahoo Inc.). New people keep Menlo vital, source deals. Mr. Siegel said, because older partners may have “lost some of the drive and hunger it Mr. More, for instance, was on the board of Check Inc. and takes to be an investor. Venture capital is more competitive was responsible for leading Check’s sale to Intuit Inc. last than ever today, and you’ve got to have both feet in.” year for about $360 million. n 26 Private Equity Analyst June 2015 fund news

roundups U.S. & Canada

U.S. & CANADA EUROPE Buyouts Buyouts 26 Banc Funds 34 Elysian Capital Boathouse Capital 35 EQT Partners Catalyst Capital Group Kings Park Capital 27 Clearlake Capital Venture Capital EnerVest 35 Joint Polish Investment I Squared Capital Fund Management Leavitt Equity Partners Safran SA Napier Park Financial Partners Northleaf Capital Partners Secondary Old Ironsides Energy 35 Mantra Gestion Post Capital Partners 28 SFW Capital Partners ASIA Buyouts Signal Hill Equity Partners Mezzanine & Other Debt Staple Street Capital 35 Babson Capital Management u Banc Funds, Chicago TPG Growth Venture Capital Trilantic Capital Partners Banc Funds, one of the oldest private equity firms focused 37 Lightspeed Venture Partners Mezzanine & Other Debt on investments in small banks, thrifts and other financial 28 Apollo Global Management LATIN AMERICA institutions, has raised a little more than $416 million so 30 Harbert Management Corp. far for Banc Fund IX LP, according to a regulatory filing. Buyouts The capital raised so far puts the fund more than halfway Venture Capital 37 Linzor Capital Partners to the $600 million offering amount indicated in the filing. 30 AKT IP Ventures Altitude Life Science Ventures MIDDLE EAST Investors approving commitments to the fund include the Washington State Investment Board and the Minnesota Aspect Ventures Venture Capital Atlas Venture State Board of Investment, according to the pension 37 Eucalyptus Growth Capital Catalyst Investors systems’ various meeting minutes. The fund’s predecessor, Middle East Venture Partners Collaborative Fund Banc Fund VIII LP, a $650 million pool raised in 2009, Cross Culture VC generated a 12.42% net internal rate of return as of Draper Nexus Ventures Sept. 30, according to WSIB performance data. 31 Founders’ Co-op GreatPoint Ventures u Boathouse Capital, Wayne, Pa. Illuminate Ventures Insight Venture Partners Junior capital investor Boathouse Capital said it held a final Institutional Venture Partners Longwood Fund close on $230 million for its second fund licensed under the Mission Bay Capital Small Business Investment Company program. Boathouse MkII Ventures Capital II LP will focus on structured debt and equity 32 MPM Capital investments of $5 million to $25 million in growing businesses Redpoint Ventures in the lower midmarket, according to a news release. The firm Rethink Education closed its first SBIC fund, Boathouse Capital LP, in 2011 RiverVest Venture Partners with $120 million, including matching capital from the U.S. SherpaVentures Small Business Administration. Boathouse participates in Slow Ventures acquisition financing, growth capital investments, majority True Ventures and minority recapitalizations, management buyouts, Whitecap Venture Partners leveraged buyouts and employee stock ownership plans. Secondary 32 Landmark Partners u Catalyst Capital Group, Toronto 33 Pomona Capital Funds of Funds Canadian distressed-for-control investor Catalyst 33 Altegris Capital Group said it reached a first closing on its most 34 Knightsbridge Advisers recent fund, Catalyst Fund Limited Partnership V, with $650 million in capital commitments. Fund V is targeting $1.25 billion and has a hard cap of $1.5 billion. The fund’s predecessor closed on $812 million of capital in 2013, surpassing the vehicle’s target, according to Dow Jones records. Catalyst said the new fund received support from existing investors in previous funds, together with new institutional investors, including university Private Equity Analyst 27 fund news June 2015 endowments, charitable foundations, pension plans, Partners I LP at its $100 million hard cap in the second family offices and financial institutions. Montana Board quarter, the person added. Established in August, Leavitt of Investments approved a $15 million commitment Equity Partners is an investment subsidiary of Leavitt to Fund IV in 2012, according to meeting minutes. Partners, a health-care consultant founded by former Health and Human Services Secretary Mike Leavitt, u Clearlake Capital, Santa Monica, Calif. to help industry stakeholders adapt to the changing dynamics of health-care provisions in the country. Mr. Special situations and private equity firm Clearlake Leavitt, who is chairman of Leavitt Partners, served in Capital was gearing up for a first close on its flagship the administration of President George W. Bush. fund between the end of May and early June at around its $1 billion target, people familiar with the matter said. The u Napier Park Financial Partners, New York firm plans to wrap up fundraising for Clearlake Capital Partners IV LP around June and could raise up to $1.35 Napier Park Financial Partners, the private equity arm billion for the fund, according to an investor due diligence of Napier Park Global Capital, has closed on $454 memo. The firm’s third fund, a 2012-vintage vehicle million for a new aircraft leasing fund. The firm teamed up that closed at $785 million, generated a net internal with lessor Air Lease Corp. to form the fund, Blackbird rate of return of 23.7% and a net investment multiple of Capital I LLC, according to a news release. In addition 1.2 times, as of Dec. 31, according to investor data. to providing 9.5% of equity to the fund, Air Lease will provide servicing to Blackbird. Napier Park plans to use the u EnerVest, Houston equity in the acquisition of about $2 billion in commercial aircraft assets by the end of 2016. Napier has previously Energy investor EnerVest planned to hold a first closing teamed up with corporate partners to form investment of between $1.2 billion and $1.3 billion on its 14th fund joint ventures. The firm operates a railcar leasing fund as early as late April, said a person with direct knowledge that was established as part of a joint venture with Trinity of the matter. The vehicle, EnerVest Energy Institutional Industries Leasing Co., a subsidiary of Trinity Industries Inc. Fund XIV LP, likely will have a series of interim closings before it completes fundraising by around June 30, the u Northleaf Capital Partners, Toronto person said. The vehicle has a $2.5 billion target and a $3 billion hard cap and will pursue investments in natural gas Canadian private equity firm Northleaf Capital Partners and oil properties throughout the U.S. Limited partners said its Northleaf Venture Catalyst Fund held another committing to Fund XIV include the Washington State closing, adding Ontario Pension Board as its newest Investment Board and the Orange County Employees investor. Total commitments from all investors now Retirement System. The firm raised its last fund about amount to $264 million, the firm said. The fund, a joint three years ago, closing on $2 billion in commitments in initiative between Canadian institutional investors 2013. That vehicle, EnerVest Energy Institutional Fund and the governments of Canada and Ontario, invests XIII LP, once levered up, had a purchasing power of chiefly in Canadian venture capital and growth equity $3.3 billion, Private Equity Analyst previously reported. funds and also makes co-investments. It started making investments in January 2014 and has backed u I Squared Capital, New York six venture funds and made five direct investments in companies so far. It has committed to funds managed I Squared Capital said it closed its debut infrastructure by XPV Capital, Georgian Partners, Versant Ventures, investment fund with total commitments of $3 billion. Golden Venture Partners, Version One Ventures and ISQ Global Infrastructure Fund LP received support Relay Ventures, and completed direct investments in from limited partners including pension funds, sovereign Wattpad Inc., Vision Critical Communications Inc., wealth funds, insurance companies, asset managers Silanis Inc., eSentire Inc. and FreshBooks Inc. and family offices in the U.S., Canada, Europe, the Middle East, Asia and Australia, according to a news u Old Ironsides Energy, Boston release. Limited partners committing to the fund include Rhode Island State Investment Commission and Old Ironsides Energy said it held the final closing of its New Mexico Regional Retirement Board. Mitsubishi latest vehicle, Old Ironsides Energy Fund II, with $1.3 billion Corp. committed $100 million as part of a strategic in commitments. The oil and gas investment manager said in partnership for infrastructure investment alongside a news release that Fund II will acquire and develop assets I Squared, according to an earlier news release. in the upstream and midstream sectors, primarily in the U.S. and Canada. Old Ironsides traces its roots back to the former u Leavitt Equity Partners, Salt Lake City energy investment team of insurer Liberty Mutual Holding Co.

Leavitt Equity Partners has raised more than $75 million u Post Capital Partners, New York so far from strategic health-care companies and health- care entrepreneurs for its inaugural fund to co-invest in Post Capital Partners, a firm focused on investments in health-care deals, a person familiar with the situation small buyouts, has raised $100.5 million for its latest fund, said. It aims to wrap up fundraising for Leavitt Equity according to a filing with the Securities and Exchange 28 Private Equity Analyst June 2015 fund news

Commission. The amount raised so far for Post Capital Equity in North America with annual revenue of $50 million to Partners III LP surpasses the fund’s $100 million target and $500 million. It plans to make investments of $15 million is slightly larger than the firm’s previous fund, which wrapped to $50 million, though with support from co-investing up in 2008 with a little less than $100 million, Private Equity limited partners, it could invest as much as $75 million in Analyst previously reported. The firm held an initial closing on a transaction. Mr. Owens said the firm plans to invest in $52 million for the fund in the spring of 2014. between eight and 12 deals from Fund II. u SFW Capital Partners, Rye, N.Y. u TPG Growth, Fort Worth, Texas

SFW Capital Partners is the latest specialty investor TPG Capital’s midmarket and growth equity platform, to quickly wrap up a fund at its hard cap. The firm TPG Growth, has closed its third fund with more than closed on a total of $347.5 million, including limited $3 billion in capital commitments, according to a news partner and general partner commitments, for its latest release. TPG Growth III LP surpassed its $2.75 billion vehicle focused exclusively on investments in analytical target after five months on the market, according to a tools and related services, said SFW Partner Roger news release. The fund also landed about $1 billion Freeman. The firm set out roughly seven months ago more than its predecessor, TPG Growth II LP, which to raise a successor to its debut fund, which closed closed in 2012 at $2 billion. Investors committing on $300 million in 2008. It targeted $325 million for to TPG Growth III include the Washington State SFW Capital Partners Fund II LP, but managed to close Investment Board, Oregon Investment Council, New the fund at its hard cap thanks in part to participation Jersey State Investment Council, New Mexico State from a “meaningful” number of return investors and a Investment Council, Teachers’ Retirement System of handful of exits, said Mr. Freeman. SFW has an extremely Louisiana and State of Wisconsin Investment Board. narrow focus: It backs the types of software businesses that other companies rely on for information, data and u Trilantic Capital Partners, New York analytics that support research, product development, process control, quality assurance, compliance, Trilantic Capital Partners, the private equity firm formed diagnostics, and sales and marketing. The firm typically in 2009 by a group of former Lehman Brothers Holdings makes equity investments of $10 million to $75 million Inc. merchant banking executives, raised nearly $333.1 in companies with earnings before interest, taxes, million so far for a North American energy-focused fund, depreciation and amortization of up to $25 million. according to a filing with the Securities and Exchange Commission. The firm began marketing the $500 million u Signal Hill Equity Partners, Toronto vehicle, Trilantic Energy Partners (North America) LP, last year. In North America, Trilantic typically invests Signal Hill Equity Partners said it has closed its $50 million to $250 million at a time in companies with third fund and a parallel partnership with 142 million enterprise values of $100 million to $1 billion. The firm, Canadian dollars in committed capital. The firm said which has offices in New York, London and Saint Peter Signal Hill Equity Partners III LP was oversubscribed Port, Guernsey, closed a U.S. buyout fund, Trilantic as surpassed its initial target of C$100 million. The Capital Partners V LP, at $2.2 billion in late 2013. firm also announced a closing for Signal Hill Equity Partnership (International) III LP. Signal Hill said it received commitments from new and existing investors. Mezzanine & Other Debt A predecessor vehicle, Signal Hill Equity Partners II LP, closed in 2008 with C$100 million in commitments. u Apollo Global Management, New York Signal Hill, with offices in Toronto and Calgary, Alberta, targets equity investments of C$8 million in C$30 Apollo Global Management has raised about $1.05 million in business and consumer services, specialty billion for a fund dedicated to credit opportunities in manufacturing, building products, food and consumer the energy sector, in what appears to be a final closing products, and resource services companies with of the vehicle, according to filings with the Securities enterprise values of C$15 million to C$75 million. and Exchange Commission and a person familiar with the situation. Apollo Energy Opportunity Fund LP u Staple Street Capital, New York has reached its target amount, with no more capital being offered, the May 8 SEC filing shows. Another Staple Street Capital said it reached the fund’s hard filing shows a related vehicle, Apollo Offshore Energy cap, closing on $265 million for its first institutional fund. Opportunity Fund Ltd., has collected about $736.9 After launching fundraising in the summer, the firm held million. The person with knowledge of the matter said a first close for Staple Street Capital II LP in December. the two vehicles belong to the same pool of capital, Staple Street focused its marketing efforts primarily in and that the amount raised by the offshore vehicle is North America, according to co-founder and Managing included in the amount raised by the core fund. The Director Stephen Owens, raising capital from endowments, energy credit fund is separate from another energy- foundations, insurance companies, pension funds, family related pool the firm is raising, Apollo Natural Resources offices and funds of funds. The firm is targeting companies Partners II LP, its second natural resources fund. Sale-Leaseback Financing

$108,240,535 $76,000,000 $158,600,000 CAD 54,000,000 Headquarters $45,895,000 Structured Parking

NYSE: GT NYSE: MOH A subsidiary of IMP Group Limited

$39,600,000 $57,000,000 $45,000,000 $160,000,000

a wholly-owned subsidiary of

A portfolio company of NYSE: ED NASDAQ: MAT Rhone Group

$83,000,000 €22,000,000 $84,400,000 $19,000,000

A portfolio company A portfolio company A portfolio company of AIM A portfolio company of AEA Investors of Liberty Global Europe of KKR

Sale-Leaseback Financing From AG Net Lease Acquisitions Criteria

AG Net Lease is actively seeking to invest in long-term, net- • Size: $15 - 600 million leased corporate real estate in the US and abroad in transactions • Location: North America and other ranging from $15 million to $600 million. AG Net Lease is seeking established markets • Lease term: 15 - 20 years, plus renewals to purchase in excess of $500 million in real estate assets • Property Type: Industrial, offce, retail, annually. We believe Angelo, Gordon’s credit and real estate fex/R&D and special-use underwriting expertise ensures highly competitive pricing and • Tenant Credit: Rated and unrated speed of execution to tenants and sponsors. • Lease: Single tenant, triple net • Additional: Build-to-suit and expansion

Contact Gordon J. Whiting, Portfolio Manager 212-883-4157 • [email protected] Angelo, Gordon & Co. • www.angelogordon.com/netlease 30 Private Equity Analyst June 2015 fund news u Harbert Management Corp., Birmingham, Ala. independent firms. The groups operated as separate franchises since the closing of Atlas’s seventh fund in Harbert Management Corp. said it closed its third 2006, and in 2013, they chose to make their split official. mezzanine debt fund at $165 million. The vehicle, Harbert After preparing for the transition, they informed limited Mezzanine Partners III LP, received support from existing partners of the decision in late 2014. Atlas’s health-care investors and new commitments from institutional investors, team kept the Atlas name and moved into new offices in including public and private pensions, fund-of-funds Cambridge, Mass. The firm now known as Atlas began firms and family offices, according to a news release. A raising $250 million for Atlas Venture Fund X LP at the predecessor fund, Harbert Mezzanine Partners II LP, closed end of last year. in 2006 with at least $92.7 million, according to a filing with the Securities and Exchange Commission. The new u Catalyst Investors, New York fund typically will invest $3 million to $15 million in small to midsize companies seeking funding for organic growth, Catalyst Investors, a growth equity firm focused on acquisitions, recapitalizations and management buyouts. technology-enabled businesses, has raised $377 million for its fourth fund, according to a news release. The final closing for Catalyst Investors IV LP surpassed the fund’s Venture Capital $350 million target and is larger than the $213 million the firm raised for its third fund, Catalyst Investors III LP, back u AKT IP Ventures, New York in 2012. Catalyst plans to invest between $10 million and $60 million at a time in companies across sectors that Incubator AKT IP Ventures said it launched a fund span business and consumer services, including digital targeting $20 million to turn patents into businesses. media, e-commerce, health-care information technology AKT IP Ventures focuses on the mobile, wearables, and education technology, as well as cloud computing and Internet of Things, big data, medical technology and communications infrastructure. The firm has already funded what it calls “multitouch” sectors. The fund will back its first investment out of the new fund in a communications startups in the AKT IP Ventures incubator’s existing infrastructure entity, IWG II Holdings LLC, which was portfolio, as well as between 10 and 15 new joint formed in partnership with InSite Wireless Group to acquire ventures, it said. It will help with prototyping, design, communication tower sites from CTI Towers Inc. marketing and sales, with the goal of turning ideas into businesses and into exits within 18 months, it said. u Collaborative Fund, New York u Altitude Life Science Ventures, Seattle Collaborative Fund, an early investor in startups such as Kickstarter Inc. and Lyft Inc., is readying to Altitude Life Science Ventures has set out to raise up close its third fund, according to two people familiar to $75 million for a new investment fund, according to a with the situation. The fund, targeted originally at $40 regulatory filing. No commitments had been received for the million, will close with about $65 million, one person fund, Altitude Life Science Ventures Fund II LP, as of late April, said. Collaborative closed a $33 million fund last year, the filing indicated. Altitude’s investments include Cambrios and a much smaller fund before that. The firm backs Technologies Corp., Constellation Pharmaceuticals companies in the sharing-economy sector. It also invests Inc. and Siluria Technologies Inc. Recently, its portfolio in startups that have a social mission, including AltSchool, company Ikaria Inc. was acquired by Mallinckrodt PLC for Good Eggs Inc. and Hampton Creek Foods Inc. about $2.3 billion. The firm also was an investor in Kythera Biopharmaceuticals Inc., which went public in 2012. u Cross Culture VC, Los Angeles u Aspect Ventures, San Francisco Cross Culture VC, a new early-stage venture firm led by Lady Gaga’s former manager Troy Carter and Intel Capital Aspect Ventures said it closed its debut fund, Aspect Partner Marlon Nichols, is raising a maiden $50 million fund, Ventures LP, at its $150 million goal. The firm was launched by according to a regulatory filing. Speaking on behalf of the Jennifer Scott Fonstad, a former managing director at Draper firm, Mr. Nichols declined to comment, citing regulations Fisher Jurvetson, and Theresia Gouw, a former a managing around fund solicitation. The fund, Cross Culture Ventures I partner at Accel Partners. The firm has made more than a LP, didn’t have any commitments as of early May, according dozen seed and Series A investments in startups including to the filing. Mr. Carter, who rose to prominence while Vida Health Inc., which makes a mobile app that connects managing Lady Gaga’s career, is chief executive of the people with personal health coaches; and Exabeam Inc., Atom Factory, where he now manages stars including John which makes cybersecurity software, a news release said. Legend and Meghan Trainor. u Atlas Venture, Cambridge, Mass. u Draper Nexus Ventures, San Mateo, Calif.

Atlas Venture hit its $280 million hard cap for its first Draper Nexus Ventures has moved closer to the $125 biotechnology-only fund. Atlas technology and health- million offering amount for its next fund, closing on $80.3 care investors said in October they would split into million, according to a regulatory filing. The firm reported Private Equity Analyst 31 fund news June 2015 last September that it had closed on $29.3 million for Draper Nexus Technology Partners II LP. Draper Nexus Historical U.S. Fundraising invests in technology, energy and industrial companies in $285.7 the U.S. and Japan. $300B (803)

$232.6 u Founders’ Co-op, Seattle 250 (640) Founders’ Co-op has closed its third and largest fund with $190.2 200 (778) $166.7 $172.1 $173.6 $163.8 (454) (630) just over $20 million, according to a blog post from co- $152.2 (733) (677) founder and General Partner Chris DeVore. Founders’ Co- (705) 150 $129.8 op, which launched in 2008 with a $2.5 million fund, focuses (435) $96.7 $99.0 on early- and seed-stage startups in the Pacific Northwest. (253) (310) 100 $77.5 (226) $70.5 The firm’s goal is to help build a regional ecosystem that (191) $46.5 can support software and technology businesses that (141) could eventually develop into large corporations on the 50 scale of local players Microsoft Corp. and Amazon.com Inc. In line with this goal, the firm maintains a partnership 0 YTD-15 Jun-14 Jun-13 Jun-12 Jun-11 with the University of Washington, with the shared goal of (as of 5/15/15) accelerating commercial innovation in the region. Raised YTD (B) Still Open (B) Total Raised (B) (No. of Funds) u GreatPoint Ventures, Cambridge, Mass. Amount raised YTD fgures in past years refect the amount raised through late May of the given year. Full-year totals refect the amount raised for the full year in any given year. Still open fgures refect the amount and number of funds GreatPoint Ventures is in the market with a $50 million we knew were open as of this point in the year for any given year. Source: Dow Jones LP Source offering for GreatPoint Ventures Innovation Fund LP, a regulatory filing said. The firm, founded in 2004, has backed companies including waste-to-biofuel maker Coskata and Snapchat Inc., reached a final close at $1.4 billion on Inc., obesity drugmaker Zafgen Inc. and water-purification its latest fund. After launching during the winter with a $1.2 company Oasys Water Inc. billion target, Institutional Venture Partners XV LP ended up oversubscribed. At $1.4 billion, IVP’s Fund XV is 40% larger u Illuminate Ventures, Oakland, Calif. than its predecessor, which closed with $1 billion in 2012, and almost twice the size of the firm’s 2010-vintage Fund Small, female-led firm Illuminate Ventures is seeking up XIII, which raised $750 million. to $30 million for its second fund. The firm, founded by Managing Partner Cindy Padnos, had yet to close on any u Longwood Fund, Boston of the $30 million offering for Illuminate Ventures II LP as of early April, the filing said. Its prior fund closed on $20 Longwood Fund, an investor in Flex Pharma Inc., which million in 2013. went public in January, has filed a $90 million offering for its third fund. The health-care firm hadn’t closed on any capital u Insight Venture Partners, New York for Longwood Fund III LP as of late April, the regulatory filing said. Longwood investments include Colorescience Insight Venture Partners is in the homestretch of wrapping Inc., maker of a line of women’s makeup with sun protection, up a pair of funds totaling more than $4 billion, according to and Calithera BioSciences Inc., a cancer-treatment people familiar with the funding. In a document distributed developer, Dow Jones records show. to investors and viewed by Dow Jones, the growth-stage firm said it gathered $2.9 billion of commitments for Insight u Mission Bay Capital, San Francisco Venture Partners IX LP. That puts the firm well ahead of the $2.75 billion target it set for Fund IX, and within sight Mission Bay Capital, a seed-stage venture firm investing of its $3 billion hard cap. At $3 billion, Fund IX would be in life science companies emerging from the University of roughly 15% larger than its predecessor, Insight Venture California and the San Francisco Bay Area ecosystem, has Partners VIII LP, a 2013-vintage fund that raised $2.57 closed MBC Fund II at $25 million, according to a news billion. People familiar with the offering said a final close is release. MBC was created in 2009 by QB3, a University of imminent for Fund IX and a separate fund, Insight Venture California research institute and accelerator. Partners Growth-Buyout Coinvestment Fund LP. It is unclear what the target is for that vehicle or if it will follow u MkII Ventures, San Francisco the same strategy as Insight’s previous co-investment vehicles, but it has raised about $1.1 billion so far. MkII Ventures, a micro-VC firm founded by San Francisco investor Ron Palmeri, has decided to focus u Institutional Venture Partners, Menlo Park, Calif. on a single portfolio company, Layer Inc., and is raising a fund through AngelList to invest in Layer apps. Mr. Institutional Venture Partners, the late-stage venture firm Palmeri has become chief executive of Layer, which that has backed companies such as Netflix Inc., Twitter Inc. lets developers add messaging functions to any app, 32 Private Equity Analyst June 2015 fund news and the Layer Fund so far has $500,000 committed by rate of return of more than 20%, RiverVest said in a news Bloomberg Beta along with undisclosed commitments release. The firm said it sees many attractive opportunities from several other investors. Mr. Palmeri launched in drugs and medical devices and will continue its strategy MkII Ventures toward the end of 2010 after he helped of building companies that it can sell in five years or less. dismantle his previous firm, Minor Ventures, which was Fund III has backed three companies since its initial close forced to shut down after its founder and limited partner, last year, the firm said. Halsey Minor, became financially overextended. Mr. Palmeri bankrolled MkII Ventures himself at first and u SherpaVentures, San Francisco then raised an evergreen fund of about $10 million from investors including Pacific Partners, SV Angel and SherpaVentures is raising up to $175 million for its second Michael Arrington’s Crunchfund. fund, SherpaVentures Fund II LP, according to a regulatory filing. SherpaVentures, which was founded by two early u MPM Capital, Cambridge, Mass. backers of car service Uber Technologies Inc., raised $150 million for its first fund. MPM Capital, which works closely with pharmaceutical companies while funding health-care startups, has closed u Slow Ventures, San Francisco its new venture fund at $400 million and brought Novartis AG and Astellas Pharma Inc. in as investors. Novartis and Slow Ventures, an early-stage investor that originally was Astellas are limited partners of MPM BioVentures 2014 structured as an investment club, has raised a new, $65 LP, which closed May 8. MPM sought $380 million and million fund. The new fund, Slow 4, came from limited capped the fund at $400 million, according to Managing partners that include technology entrepreneurs and leaders, Director Luke Evnin. The team, which began discussing and a select set of venture capital firms, according to a the fund with LPs in late 2013, held a first closing in mid- news release. Kevin Colleran is the managing director of the 2014 and has invested the pool in six startups, he said. fund, which includes partners Kevin Colleran, Dave Morin MPM’s new partnership is a jump from its previous fund, and Sam Lessin. The four people involved in the fund met MPM BioVentures V LP, which closed just shy of $275 while working at Facebook Inc. Mr. Morin also is the chief million in 2010. executive of the social network Path Inc. u Redpoint Ventures, Menlo Park, Calif. u True Ventures, San Francisco

Redpoint Ventures quickly raised its new venture fund True Ventures has set out to raise up to $175 million for True and kept it at its sweet spot of $400 million. The firm’s Ventures Select I LP, according to a regulatory filing. The firm, sixth fund, Redpoint Ventures VI LP, is the same size founded in 2005, manages a portfolio including Bandcamp as its prior pool, which closed in 2013 and followed Inc., Blue Bottle Coffee Co. and Puppet Labs Inc. a similarly sized fund raised in 2009. Redpoint began rounding up investments earlier this year and received u Whitecap Venture Partners, Toronto interest from existing limited partners, Dow Jones earlier reported. The firm’s portfolio saw four IPOs and six Canadian early-stage investor Whitecap Venture Partners sales since 2014, with a total market capitalization of has raised 70 million Canadian dollars for a new fund that more than $8 billion, said Satish Dharmaraj, a partner partners there hope to turn into a C$100 million fund. at the firm, in a blog post announcing the fund May 13. Limited partners in the new fund, Whitecap III LP, include Its portfolio includes companies such as Stripe Inc. Bank of Montreal, Kensington Venture Fund and several and NextDoor.com Inc., and its now-public companies family offices. Before raising this capital, Whitecap was an include HomeAway Inc., 2U Inc. and Zendesk Inc. evergreen fund, investing its own partners’ – but not outside – money into Canadian startups across three industries: u Rethink Education, San Francisco medical technology, food technology, and information and communications technology. Whitecap seeks to invest $2 Rethink Education, a venture firm focused on education million to $7 million in seed to Series A deals, and to add technology, is raising $125 million for its second fund, follow-on capital of up to $6 million more, up through the according to a regulatory filing. As of early May, there were time of an exit. It plans to make its total investment in any no commitments to the fund, Rethink Education II LP. The given company as much as $15 million. predecessor fund raised $25 million in 2012, according to a regulatory filing. Secondary u RiverVest Venture Partners, St. Louis u Landmark Partners, Simsbury, Conn. Life sciences investor RiverVest Venture Partners announced the final closing of RiverVest Venture Fund III Landmark Partners said it hit the $1.6 billion hard cap LP at $80.2 million. The fund is a bit larger than its $75 for its latest real estate secondaries fund, amassing one of million predecessor, which the firm wrapped up in 2008 the largest global pools of capital dedicated to the space. after an initial close in 2006. That fund has a net internal The new fund comes as the real estate secondaries market Private Equity Analyst 33 fund news June 2015

finally starts to hit its stride, with volume growing more according to a news release. The majority of Pomona than tenfold in the past decade. The final tally for Landmark Investment Fund’s investments will be made through Real Estate Fund VII amounts to more than double the secondary commitments, with a supplementary focus $718 million Landmark raised for a predecessor fund, on primary and direct deals. Founded in 1994, Pomona which closed in 2011. With backing from limited partners Capital, the private equity platform of Voya Investment including Kentucky Teachers’ Retirement System and Management, in April held a final close on $1.75 billion Nebraska Investment Council, the firm passed the $1 for its latest secondary fund, Pomona Capital VIII LP. billion target it set for Fund VII. u Pomona Capital, New York Funds of Funds

Pomona Capital is launching Pomona Investment Fund u Altegris, La Jolla, Calif. to give accredited investors easier access to private investing. The new vehicle, distributed by Voya Investments The Securities and Exchange Commission in April Distributor LLC, will have a $25,000 minimum subscription approved a new fund that plans to buy stakes in funds requirement and an investor-friendly tax reporting structure, run by Kohlberg Kravis Roberts & Co. The fund will

Recent Disclosed LP Commitments

Limited Partner Fund Commitment (M) Fund Target (M) Board of Regents of the Athyrium Opportunities Fund II LP $40.0 N/A University of Michigan Emergence Capital Partners IV LP $15.0 $335.0 * Los Angeles County Employees’ Blackstone Capital Partners VII LP $200.0 $16,000.0 Retirement Association Merced County Employees’ GSO Energy Select Opportunities Fund LP $7.5 N/A Retirement Association Taurus Mining Debt Fund $5.0 N/A New York State Common TPG Growth III LP $300.0 $3,000.0 Retirement Fund TPG Partners VII LP $250.0 $10,000.0 Capital Alliance Private Equity IV $85.0 $600.0 PVP Fund I-A LP $30.0 N/A New York State Teachers’ Rhône Partners V LP €100.0 N/A Retirement System ICG Europe Fund VI LP €70.0 $2,500.0 Thoma Bravo Special Opportunities Fund II LP $70.0 $1,000.0 * Oregon Investment Council Blackstone Capital Partners VII LP up to $500.0 $16,000.0 EnCap Energy Capital Fund X LP $150.0 $5,000.0 RRJ Capital Master Fund III LP $150.0 $4,000.0 TPG Specialty Lending Europe Fund I LP $100.0 N/A GGV Capital Select LP $50.0 N/A Pennsylvania Public School Coller International Partners VII LP $100.0 $5,000.0 Employees’ Retirement System Clearlake Capital Partners IV LP $75.0 $1,000.0 South Carolina Retirement System Blackstone Property Partners LP up to $300.0 N/A Investment Commission South Dakota Retirement System Blackstone Real Estate Partners VIII LP $300.0 $13,000.0 State of Michigan Retirement Systems New Leaf Ventures Partners $150.0 N/A TPG Partners VII LP $150.0 $10,000.0 FS Equity Partners VII LP $100.0 $850.0 * Kelso Investment Associates IX LP $100.0 $2,500.0 Khosla Ventures V LP $50.0 $1,000.0 Public Pension Capital $50.0 N/A (separate account) Flagship Ventures Fund V LP $22.0 N/A * Advent Latin American Private Equity Fund VI LP $20.0 $2,000.0 * Teachers’ Retirement System Apollo Natural Resources Partners II LP $75.0 N/A of Louisiana GSO Energy Select Opportunities Fund LP $75.0 N/A Vermont Pension Investment Committee HarbourVest Partners Fund X LP $50.0 N/A Virginia Retirement System TPG Partners VII LP $300.0 $10,000.0 Oaktree Opportunities Fund X LP/Oaktree Opportunities Fund Xb LP $200.0 $10,000.0/N/A Blackstone Real Estate Partners VIII LP $150.0 $13,000.0 KKR Special Situations Fund II LP $150.0 $3,000.0 Pantheon/VA NRP LP $100.0 N/A Penwood Select Industrials Partners IV LP $100.0 N/A Gateway Mezzanine Partners II LP $50.0 N/A * *Closed. N/A - not available. Source: Compiled by Dow Jones Private Equity Analyst from pension fund disclosures. 34 Private Equity Analyst June 2015 fund news be managed by alternative investment firm Altegris. The Altegris KKR Commitments Fund will be available only to accredited investors. The minimum investment Europe will be $25,000, a lower threshold than some similar funds that have launched in recent years. The fund will charge investors up to 2.6% in annual fees, or $260 per $10,000 invested. Unlike other funds hoping to lure such investors, the Altegris fund will be able to advertise and to make information about its performance available to the public because it had to clear more regulatory hurdles. KKR has lent its name to the fund, but it won’t have any role managing it and won’t get a share of its annual fees. The firm will collect its standard management fee on the investments the fund makes in its buyout pools, which is typically between 1% or 2% a year and a 20% cut of profits above certain levels. Buyouts u Knightsbridge Advisers, Bartlesville, Okla. u Elysian Capital, London

Fund-of-funds investor Knightsbridge Advisers has A firm set up by a founding partner of European closed on $253 million for its eighth venture capital buyout firm Doughty Hanson has reached a first close pool. Knightsbridge Venture Capital VIII LP closed on its new fund, according to a person familiar with at its $200 million hard cap, the firm said in a news the matter. Elysian Capital, a U.K. lower midmarket- release. The $253 million total includes a separate focused firm run by Doughty Hanson co-founder Ken account and the general partners’ commitment. The Terry, reached a £180 million first closing for its second fund will invest predominantly in early-stage venture fund in late April, the person said. The fund launched capital partnerships that focus on IT and, to a lesser at the beginning of this year with a £225 million target extent, life sciences and energy technology. In addition, and a £250 million hard cap. Elysian closed its £130 the fund will make select investments in venture million debut fund in September 2010 after launching growth equity and venture capital secondaries. fundraising following the start of the financial crisis.

Market Monitor 2014 Funds Through May New Enterprise Associates ranks as one of the venture capital industry’s most Type of Fund Number Amount* (M) prodigious fundraisers, and this month is no exception, with the frm closing on Buyouts/Corporate Finance 114 $69,332.4 $2.8 billion for its 15th fund, the most the frm has ever raised for a single pool. Venture Capital 101 $16,518.7 A $350 million co-investment vehicle boosts NEA 15’s frepower to $3.15 billion, Funds of Funds 22 $3,614.2 exceeding the record $3 billion fund raised by Technology Crossover Ventures in Mezzanine 10 $1,729.2 2007, which was gathered at the height of the venture boom. The new fund also Other Private Equity 6 $5,480.2 marks the start of a leadership transition at the frm as Scott Sandell joins NEA Total 253 $ 96,674.8 veteran Peter Barris as managing general partners. *Totals are rounded to one decimal place.

Top 5 Buyout Funds Closed In Most Recent Month Fund Name Fund Region Firm Name Location Total Amt. Raised* (M) Target Amt. (M) 1 ISQ Global Infrastructure Fund LP Global I Squared Capital Advisors New York $3,000.0 $2,000.0 2 TPG Growth III LP U.S. TPG Growth San Francisco $3,000.0 $2,750.0 3 Equistone Partners Europe Fund V Western Europe Equistone Partners Europe London $2,194.7 $2,366.9 4 Waterland Private Equity Fund VI LP Western Europe Waterland Private Equity Investments Bussum, Netherlands $1,668.4 $1,512.4 5 Norwest Equity Partners X LP U.S. Norwest Equity Partners Minneapolis $1,600.0 N/A

Top 5 VC Funds Closed In Most Recent Month Fund Name Fund Region Firm Name Location Total Amt. Raised* (M) Target Amt. (M) 1 New Enterprise Associates 15 LP U.S. New Enterprise Associates Timonium, Md. $2,800.0 $2,500.0 2 Institutional Venture Partners XV LP U.S. Institutional Venture Partners Menlo Park, Calif. $1,400.0 $1,000.0 3 Menlo Ventures XII LP Global Menlo Ventures Menlo Park, Calif. $400.0 $400.0 4 MPM BioVentures 2014 LP U.S. MPM Capital Boston $400.0 $380.0 5 Redpoint Venture VI LP U.S. Redpoint Ventures Menlo Park, Calif. $400.0 $400.0 April 13 to May 14. *Non-USD amounts converted using exchange rate of the first day of the month of the fund closing and fund offering. Source: Dow Jones LP Source Private Equity Analyst 35 fund news June 2015 u EQT Partners, Stockholm world-wide for investment opportunities. The investment entity will be overseen by Jean-Pierre Cojan, Safran’s European firm EQT Partners has set a €6.75 billion hard executive vice president of strategy and transformation. cap for a new fund and asked limited partners for additional It will be directed by Grégoire Aladjidi, who has joined time to invest it, according to a letter to investors and a Safran to take this position, and Hélène de Cointet. person with knowledge of the fundraising. EQT initially targeted €5.25 billion for its latest flagship buyout fund, but after encountering demand for more than double that Secondary amount, it set the €6.75 billion cap with plans to hold a closing June 1. It is unclear whether the close will be its u Mantra Gestion, Paris first and final, though one investor said it was likely, given the demand. If it reaches its hard cap, EQT VII would be Mantra Gestion said it raised €53 million in total capital more than 40% larger than its predecessor, EQT VI, which commitments so far for Mantra Secondary Opportunities launched in 2011 and received €4.75 billion in commitments. fund, above the firm’s target of €50 million. The firm in a news release said it is confident Mantra Secondary u Kings Park Capital, London Opportunities, which began fundraising in August, will hit its hard cap of €75 million. Mantra Secondary Kings Park Capital, a private equity firm set up by former Opportunities will build on the model adopted by the UBS AG bankers, has hit a final close on its second fund. firm’s Mantra Alternative Private Equity fund of funds, The firm has raised around £75 million in commitments for which began investing in 2011, the firm said. The its new fund and a further £10 million for co-investments, secondary fund will buy stakes in closed private equity according to co-founder Jason Katz. The firm has been funds that focus on intellectual property, life insurance fundraising since the end of 2013 and hit a final close settlements, litigation funding, technology applied to on the new vehicle in early April. Kings Park Capital was water, agribusiness, timber, mining, royalty strategies, set up in 2007 by Mr. Katz and fellow UBS banker Hugo and shipping and aircraft leasing. Robinson, with the pair raising £57.5 million for their first fund in 2008. The new fund’s investors are mainly high-net- worth individuals, but the firm also managed secured its first institutional investor for the fund, said Mr. Katz. Asia Venture Capital u Joint Polish Investment Fund Management, Warsaw

Joint Polish Investment Fund Management announced the first closing of its new venture capital fund, Joint Polish Investment Fund I, at $42 million. It is the first institutional venture capital fund operating out of Poland that is completely dedicated to life-science investments, a news release said. The fund will investment in early and midstage companies with a close relationship to Poland. Investment activities will focus on areas with strong growth, relatively short holding periods and high return potential, Mezzanine & Other Debt such as companies in the area of medical technology, enabling technology or mobile health. JPIF I is backed u Babson Capital Management, Springfield, Mass. and supported by the National Centre for Research and Development, an executive agency of Poland’s Ministry Babson Capital Management wrapped up fundraising of Science and Higher Education supporting national for its latest Asia-Pacific focused mezzanine fund, sciences as well as generation innovation policies. closing on $177.6 million. The fund, Gateway Mezzanine Partners II LP, will be managed by teams in Sydney u Safran SA, Paris and Hong Kong, and used primarily to invest in private equity-sponsored transactions across Australia, New French aerospace and defense company Safran SA is Zealand, Singapore, Japan and Hong Kong. Virginia getting into the venture capital game with Safran Corporate Retirement System committed $50 million to the Ventures. The company is setting aside €50 million over the fund, Dow Jones reported in May. The firm raised next three years to fund its venture capital vehicle. Safran “approximately $100 million” for a predecessor which is considering investments in areas such as advanced closed in 2012, according to a spokesman. Babson’s materials, robotics, energy production and network sensors, private credit platform, which manages more than $29 the company said. The business will initially seek investments billion, includes mezzanine and private equity teams in Europe and North America, though eventually look based in the U.S., Europe and the Asia-Pacific region. STAY AHEAD OF THE GAME

Global investors use Dow Jones VentureSource every day to examine t 88,000+ PE- and VC-backed trends, perform due diligence and seize opportunities — and so can you. Companies With the world’s most comprehensive private equity and venture capital deal t
24,000 Active Investors. database, you’ll be armed with the news and analytics needed to fuel better t
4,000+ LPs. deal-sourcing, fundraising, investments and partnerships. t
415,000+ Executives World-wide

STAY ONE STEP AHEAD t PLUS thousands of verifi ed OF THE COMPETITION. fi nancing deals and liquidity events

Discover more at: dowjones.com/venturesource VENTURESOURCE ©2015 Dow Jones & Company, Inc. All rights reserved.

MRKT-12064_PEVC_VentureSource_Ad_8.5_x_11_v8_Final_Hires.indd 1 3/11/15 2:33 PM Private Equity Analyst 37 fund news June 2015

Venture Capital u Lightspeed Venture Partners, Menlo Park, Calif. Middle East

Lightspeed Venture Partners is raising up to $115 million for an India-focused fund, Lightspeed India Partners I LLC, according to a regulatory filing. The firm invests in the U.S. and internationally and has investment advisers in Silicon Valley, India, Israel and China. Lightspeed had raised $1.05 billion for its 10th flagship investment fund, Lightspeed Venture Partners X LP, as of a November regulatory filing.

Latin America Venture Capital

u Eucalyptus Growth Capital, Tel Aviv

New investment firm Eucalyptus Growth Capital plans to raise $300 million for a fund focused on late-stage Israeli companies, according to a news release. The partnership, led by Dadi Permutter, Rami Hadar and Eldad Tamir, will focus on investing in late-stage Israeli companies as they head to initial public offerings while creating revenue in the hundreds of millions of dollars.

u Middle East Venture Partners, Beirut Buyouts Middle East Venture Partners announced the first close u Linzor Capital Partners, Santiago, Chile of Middle East Venture Fund II at $15 million. The fund, which has already made four investments, is the firm’s After roughly six months on the road, Linzor Capital fourth fund, succeeding its $70 million Impact Fund, Partners closed on $621 million for its latest and largest which launched last year. The new fund aims to close pan-regional Latin American private equity fund. Linzor in the second quarter of this year with commitments Capital Partners III LP is a follow-up to Linzor Capital of $30 million. It will invest $500,000 to $3 million in Partners II LP, a $465 million fund that closed in 2011. Middle Eastern technology companies, concentrating Similar to its predecessors, Fund III will acquire companies on Web and mobile startups. Mobile communications in Latin America, primarily in Mexico, Chile, Peru and company Zain Group is a limited partner. n Argentina. The firm typically invests between $20 million and $85 million in equity capital per deal in companies with Want more detail on these and other fundraisings? Visit our enterprise values between $75 million and $400 million. subscription website at www.privateequityanalyst.com.

BE SEEN IN ALL IN THE RIGHT PLACES. Private Equity Analyst t Private Equity News t VentureWire t LBO Wire

We reach a global audience of professionals. So should you.

Advertise with Dow Jones and be seen.

For more information contact: James Lindquist +1 415-439-6665 | [email protected]

©2015 Dow Jones & Co., Inc. All rights reserved. 38 Private Equity Analyst June 2015 deals & exits

LBO Focus Debt Weighs On Weight Watchers as Dieters’ Habits Change By LILLIAN RIZZO challenges it faces amid a thinning customer base that has led to declining sales. Sales in the first quarter were down International Inc., 21.3% to $322.1 million, compared with the same period Weight Watchers a company devoted in the prior year. Full year 2014 revenue was approximately to helping people shed unwanted pounds since the 1960s, is $1.48 billion, dropping 14.2% from $1.72 billion in 2013. carrying some weight of its own – about $2.3 billion in debt. Weight Watchers has struggled with profitability in recent quarters due to restructuring costs, recording a net loss of The New York company took on the bulk of that debt thanks $5.4 million in the first quarter of 2015. in part to Artal Luxembourg SA, the investment vehicle of a European family The company is working to gain back customers and expand that initially backed the its reach among members of the millennial generation, who Weight Watchers company in 1999 via its have different dieting habits than those of prior generations. private equity investment Despite a strong brand, however, these challenges, International Inc. adviser Invus Group. The combined with an already hefty debt load, have weighed on Industry investment has paid off the company’s share price and could make one potential handsomely for Artal and exit route – namely a sale to other private equity investors – Weight loss, dieting support program Invus but poses challenges trickier, said analysts, bankers and a private equity executive. for Weight Watchers as it Private Equity Owner fights to adapt to changing Weight Watchers was the brainchild of Jean Nidetch, a Artal Luxembourg SA, through its consumer habits. Queens, N.Y., housewife who started conducting weight- investment adviser Invus Group loss meetings in her basement in the early 1960s. In 1963, Year of Initial Investment “Unfortunately, the brand she launched the company, which grew quickly throughout 1999 hasn’t been modernized the U.S. More than a decade later, H.J. Heinz Co. bought for a long time and [the Weight Watchers and held it until 1999, when it sold the Initial Deal Size company] is trying to do company to Artal for $735 million. Heinz maintained a small $735 million that now,” said one analyst stake in the company and still sells Weight Watchers’ and Capital Structure tracking the company. Smart Ones brand frozen meals. $229.2 million tranche B-1 term loan maturing in April 2016, In 2012, Weight Watchers The company’s growth has suffered amid the growing $2.058 billion tranche B-2 term completed a $720 million popularity of digital-based fitness apps, such as Under loan due April 2020; $50 million Dutch auction tender offer Armour Inc.’s MyFitnessPal Inc., as well as the low popularity undrawn revolving credit facility to repurchase a portion of dieting among millennial consumers. More than 25% due 2018 of Artal’s shares at $82 of baby boomers, defined as those aged 51 to 69, were each, forcing the company on a diet, compared with only 12% of millennials, or those Fiscal 2014 Revenue to refinance its debt. Artal aged 18 to 34, as of January 2014, according to research $1.48 billion still owned 51.9% of company NPD Group. Yet, in 2015, the U.S. millennial Fiscal 2013 Revenue Weight Watchers stock as population is projected to hit 75.3 million, surpassing the $1.72 billion of Dec. 31, 2014. projected 74.9 million baby boomers, according to NPD.

Competitors As of 2012, the investors “It’s certainly true that millennials are likely to embrace [do- Jenny Craig Inc./Curve had pocketed $3.8 billion it-yourself] and app-based solutions, at least relative to the International Inc. through a combination of general population,” said Monty Sharma, chief executive of Source: U.S. Securities and Exchange dividends and stock sales, North Castle Partners-backed Jenny Craig Inc. and Curves Commission an exceptionally strong International Inc. in an email. “But everything we’ve seen return on their $224 million suggests that all consumers, whether millennials or not, fall initial equity investment, according to a 2012 report by off these programs quickly after the initial engagement.” Forbes magazine. Weight Watchers was somewhat slow to embrace the Weight Watchers has a debt payment of about $300 million digital revolution – although it has been working swiftly to coming up in 2016 and $2.1 billion due in 2020, according catch up. In March, the company bought Weilos Inc., an to filings with the Securities and Exchange Commission. online social media startup that provides a mobile health The company’s heavy debt load exacerbates the and weight-loss community, for roughly $6.7 million. Private Equity Analyst 39 deals & exits June 2015

“Support and tracking weight loss has changed fundamentally through digital technology,” said Bruce Cohen, head of retail private equity at global management consulting firm Kurt Salmon. “Now maybe a support group needs to be super local, like meeting at someone’s home, or doing it over webcam, texting and using social media tools like Instagram.”

The company has started cost-cutting initiatives and introduced “Expert Chat” and digital coaching platforms. It also began a partnership with Humana Inc., a health and wellness company, offering Humana’s employees free and discounted plans for Weight Watchers. This partnership, however, won’t significantly impact revenue in 2015, management said during an earnings call on May 5.

Many of these measures are designed to appeal to a growing consumer focus on healthy lifestyle habits, such as eating more nutritious foods and regular exercise, over dieting, a trend current Chief Executive James R. Weight Watchers also still generates “a decent amount Chambers acknowledged during a recent public earnings of cash flow,” said another analyst who didn’t want to be call. “As we stated in our last call, the underlying desire for named. As of April 4, there was about $211 million in cash weight loss is still a very important part of the equation,” on the balance sheet, following a $60 million early tender said Mr. Chambers. “However, the consumer wants to offer to lower debt. get there through a more holistic mind-set of generally healthier eating, wellness and fitness, with weight loss Private equity firms have shown interest in well-known di- being a critical element of this bigger picture.” eting brands. North Castle bought Jenny Craig from Nestlé SA, combining it with Curves International in 2013. Similar It’s unclear exactly what future plans Artal and Invus have to Weight Watchers, Jenny Craig is a program that’s for Weight Watchers as Invus did not respond to requests designed to help members lose weight with a support for comment and Weight Watchers declined to comment. system. Roark Capital Group has put diet program Atkins Because Invus invests out of an evergreen structure, it Nutritionals Inc. up for sale, The Wall Street Journal could conceivably hold its stake in the company for many reported, and MidOcean Partners still owns the South years to come and potentially benefit yet again if and when Beach Diet brand. the company’s performance improves. Weight Watcher’s stock also has declined significantly, Should the firm’s wealthy family backers decide to sell, to $6.19 per share as of May 26, down from $21.58 a however, analysts and at least one private equity executive year ago, potentially making it a cheaper buy. Time will tell point to several factors that could still make Weight Watchers whether the company has as much success getting as lean an attractive target for prospective investors. Most notably, and mean as the many clients it has helped. “I don’t think they point to the company’s strong brand recognition. “The there’s much doubt the Weight Watchers’ program works brand could be worth taking a haircut on the debt and taking and self-dieting does not. But the question is how do you this company private,” said the executive. modernize it?” said the first analyst. n

Weight Watchers Timeline

1961 .....Jean Nidetch attends obesity clinic and begins holding meetings in basement.

1963 .....Ms. Nidetch offcially launches Weight Watchers.

1978 .....H.J. Heinz Co. acquires the company.

1999 .....European family investment vehicle Artal Luxembourg SA acquires the company for $735 million via investment manager Invus Group.

2012 .....Weight Watchers conducts a $720 million Dutch auction tender offer with Artal.

2015 .....Ms. Nidetch dies at age 91. 40 Private Equity Analyst June 2015 deals & exits

VC Focus Venture Capital Continues to Flow Into Chinese Startups By ANETTE JÖNSSON Total investment increased by 173% compared with the first quarter of last year, making this the second most active firms continued to quarter since VentureSource began compiling the data in Venture capital pour money into China 2006. Dow Jones VentureSource is owned by Dow Jones & during the first three months of 2015, putting the industry Co., publisher of Private Equity Analyst. on course for another banner year. The number of deals increased to 215, up 56% from the Investors injected a combined $6.53 billion into venture- same period last year, but was down from 270 in the fourth backed Chinese companies in the first quarter, which was quarter of 2014, reflecting the increase in deal sizes. down marginally from the record-breaking $6.86 billion committed in the fourth quarter of 2014 but well above the The rise in deal sizes was particularly pronounced in later- historical trend, Dow Jones VentureSource data show. Just stage financing rounds, where the median investment jumped three months into the year, the industry has already invested fourfold to $80 million compared with a year earlier. It was also 40% of the record $16.21 billion it committed to Chinese more than double the median investment of $34.3 million in startups in 2014. the previous quarter. Overall, the median financing size fell to $8 million from $9.8 million in the fourth quarter of last year, “It looks like it may be another record year,” driven by a but was largely in line with the number for 2014 as a whole. probable increase in both the number of investments and the size of individual deals, said Johnny Jiang, an investment The largest deal in the first quarter was the $850 million manager with IDG Capital Partners in Hong Kong. investment in mid-March into Shanghai Hantao Information Consultancy Co., which operates online search and city Part of the reason for the increase in activity, he said, is portal Dianping.com. It was followed by a $700 million round that several of China’s large listed technology companies, for Beijing Sankuai Technology Co., which provides online such as Tencent Holdings Ltd., Baidu Inc. and 360.com, deals for local goods, services and events through sites are now at a stage where they are looking to put excess such as Meituan.com; and the $478.7 million committed to capital to work through venture-style investments in small Shanghai Lujiazui International Financial Asset Exchange companies. They are also pushing up prices, he said, which Co., a provider of online and mobile platforms for investment is contributing to the larger deal sizes. and financing, commonly known as Lufax.

Largest Chinese Deals in First Quarter of 2015 Amount Company Name Headquarters Industry Group Raised (M) Investors Shanghai Hantao Information Shanghai Consumer $850.0 Hina Group, Temasek Holdings Pvt. Ltd., Wanda Group Consultancy Co. Services Beijing Sankuai Technology Co. Beijing Consumer $700.0 Hillhouse Capital Management Services Shanghai Lujiazui International Shanghai Business & $478.7 BlackPine Private Equity Partners*, CDH Investments, China Financial Asset Exchange Co. Financial Services International Capital Corp. Shanghai Lazasi Information Shanghai Consumer $350.0 CITIC Private Equity Funds Management, JD.com Inc., Technology Co. Services Sequoia Capital, Shanghai Hantao Information Consultancy Co., Tencent Collaboration Fund Shenzhen Binxun Technology Co. Shenzhen Consumer $200.0 58.com Inc.*, Matrix Management Corp., Sequoia Capital Services Youxin Hulian (Beijing) Beijing Consumer $170.0 Baidu Inc., Coatue Management, Kohlberg Kravis Roberts & Co. Information Technology Co. Services Shanghai Qijia Net Shanghai Consumer $160.0 Undisclosed Information Technology Co. Services Beijing Dianfeng Technology Co. Beijing Consumer $110.0 CITIC Capital Holdings, Matrix Management Corp., Morningside Services Group (Holdings) Ltd., Renren Inc.*, Sequoia Capital Beijing Jiufu Times Investment Beijing Business & $110.0 Grandis Capital (HK) Ltd., Guangjie PE Fund, IDG Capital Consultant Co. Financial Services Partners, Incorp Capital, SIG Asia Investment, Union Fortune *Led round. Source: Dow Jones VentureSource Private Equity Analyst 41 deals & exits June 2015

Venture Investment in China Maintains Strong Pace in First Quarter

300 $8,000M 270 $6860.5 237 $6534.8 6,000 225 172 215

143 138 4,000 133 131 128 135 $3627.9 150 117 116 $3331.4 107 110 102 107 93 90 81 85 85 83 83 $2392.3 $2469.6 $2084.9 $2051.3 $1928.0 66 2,000 56 $1731.0 $1660.0 $1552.8 75 $1500.3 $1454.7 $1419.9 $1136.7 $1118.1 $1278.5 $1181.4 $822.0 $957.6 $884.7 $537.1 $704.2 $731.0 0 0 1Q154Q143Q142Q141Q144Q133Q132Q131Q134Q123Q122Q121Q124Q113Q112Q111Q114Q103Q102Q101Q104Q093Q092Q091Q09 Total Amount Invested (M) Total Number of Financings

Source: Dow Jones VentureSource

Venture capital firms were particularly fond of the Chinese There were 21 venture-backed IPOs in the first consumer services sector, which spawned eight of the top quarter, 50% more than in the fourth quarter of last 10 deals and made up 67% of overall investment. year, but below the 27 deals completed in the first three months of 2014, when the Chinese government Online shopping site providers, such as Sankuai, were a lifted its 15-month moratorium on new listings. The driving force behind investments into consumer services, combined IPO value increased by 31% to $1.7 but notably, the vast majority of that capital went into later- billion from $1.3 billion in the previous quarter, stage companies that were already generating revenue. This but was down from $2.05 billion a year earlier. suggests venture firms as a group are eager to limit their risks. Online gaming company Beijing Kunlun Tech Co. “As valuations are getting higher, people are becoming completed the largest VC-backed IPO in the first quarter, more cautious about big-scale investments, and companies raising $229 million in connection with its listing on the with revenue provide more certainty,” IDG’s Mr. Jiang said. Shenzhen Stock Exchange’s ChiNext board in mid-January. He added that although valuations are looking high at the moment, “for the right company, there is always room for it China-based VC firms also took advantage of the to go even higher as the business grows.” cheap capital available in the current low-interest-rate environment to raise $922 million in the first three months IDG Capital was the most active investor in China in the this year, 2.5-times the amount raised in the fourth quarter first three months, with 21 deals, followed by Sequoia of 2014. The fundraising was split between six firms, Capital with 18 and Matrix Partners with 13. compared with nine in the previous quarter. n

Chinese Consumer Services Sector Draws The Most Investment Attention in First Quarter (M)

2012 2013 2014 2015 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Business and Financial $221.0 $87.6 $122.7 $107.2 $146.2 $202.0 $52.4 $346.6 $243.3 $526.4 $412.0 $435.2 $1,345.9 Services Consumer Goods $279.7 $104.5 N/A $119.6 $151.5 $31.4 $3.5 $33.8 $43.2 $148.3 $32.6 $58.2 $52.5

Consumer $523.9 $889.7 $524.5 $1,060.5 $300.8 $519.7 $1,042.0 $846.2 $1,498.4 $2,270.7 $2,219.8 $3,759.3 $4,409.5 Services Energy and Utilities $50.2 N/A $16.2 N/A N/A N/A $17.2 $10.2 N/A N/A $10.2 N/A N/A Health Care $27.6 $47.9 $107.9 $30.0 $4.8 $166.3 $100.8 $38.9 $78.9 $181.1 $89.1 $231.5 $183.5 Industrial Goods & $43.2 $55.6 $24.2 $24.0 $25.7 $62.1 $4.8 N/A $4.5 $3.0 $32.1 $23.3 $16.6 Materials Information Technology $129.5 $314.8 $89.2 $113.5 $102.0 $200.0 $331.3 $144.2 $524.1 $495.2 $525.7 $2,311.0 $523.6 Source: Dow Jones VentureSource 42 Private Equity Analyst June 2015 people

Rising Stars Deal Makers Dominate Europe’s Under-40 Rising Stars With private equity exits reaching their highest levels on record, deal makers have returned to the fore in the industry. With that in mind, our U.K. sister publication Private Equity News has selected 40 of the most influential European private equity executives under the age of 40. The list includes executives who have navigated portfolio companies through sales and initial public offerings, generating strong returns for their firms, as well as people who have come up with innovative and groundbreaking financing structures to support portfolio companies. Below we feature six of PEN’s “40 Under 40 Rising Stars” profiles.

LUCIAN SCHÖNEFELDER who has advised on 25 due diligence processes on deals between £200 million and £2 billion over six years, was Director, Private Equity, Kohlberg promoted to principal in 2014. Her career as an analyst, Kravis Roberts & Co. investment manager and consultant has set Ms. Henrik apart from her peers, with deals experience spanning Lucian Schönefelder is viewed by the consumer goods, technology, telecommunications, some of his peers as a future leader payments, business services, education and industrial at Kohlberg Kravis Roberts & Co. In goods sectors. After six years at Eastern European private 2014, the London-based martial arts equity firm Plasmass International specializing in packaging enthusiast who specializes in Krav Maga materials and a stint at Banco Santander SA’s infrastructure – a form of self-defense developed for private equity fund, she switched to consultancy at OC&C the Israeli military – was tasked with Strategy Consultants and then took a job at BCG. Ms. establishing the European arm of KKR’s new growth equity Henrik speaks four languages and became the first business. Investing in technology companies seeking global Romanian national to receive an M.B.A. at Dartmouth expansion and with around $500 million at his disposal, College’s Tuck School of Business in 2008. She is co- Mr. Schönefelder has overseen the $50 million acquisition authoring a BCG research paper on minority investment, of a minority stake in IT software firm Arago GmbH and which will be published later in 2015. led its $30 million investment in Israeli Internet business ClickTale Ltd. A director in KKR’s technology, media and telecommunications team since 2013, he has completed ANDY DAWSON deals worth $1.9 billion in the past 12 months. The German- born Mr. Schönefelder started out in J.P. Morgan’s mergers Managing Director, and acquisitions unit in London in 2004 before joining KKR Advent International in 2007. He was promoted to principal in 2009. Outside of work, he is developing an online platform to connect charity Andy Dawson has been building his donors and volunteers with nonprofit organizations. reputation and relationships in the consumer and retail sector, working on many of Advent International’s CRISTINA HENRIK highest-profile deals ahead of his promotion to managing director in Principal, December. He is a director at U.K. Boston Consulting Group retailer DFS Trading Ltd., which Advent bought in 2010 for £500 million, and floated on the London Stock Exchange in Cristina Henrik is described by March 2014, raising £98 million and valuing DFS at £543.2 colleagues as a “powerhouse” of million. Mr. Dawson also worked on deals to buy an $845 Boston Consulting Group’s private million stake in Canadian sportswear brand Lululemon equity practice in London, which she Athletica Inc., in 2014. He joined Advent as an associate helped build since joining as a founding in 2004, and is recognized for “technical and analytical member in 2009. The team has since skills that complement his ability to motivate and encourage quadrupled in size and Ms. Henrik, people,” according to a lawyer. Private Equity Analyst 43 people June 2015

JUERGEN PINKER Partnership Capital Fund I, Mr. Coffin spent much of the year liaising with investors across the U.S., Europe, Managing Director, the Middle East and Asia. Within five months of their Blackstone Group launch in May, both funds closed after having secured a combined £1.05 billion. Mr. Coffin is also responsible German-born Juergen Pinker was for sourcing and managing Inflexion’s investments in promoted to managing director in the north of England, a role he has held since mid- Blackstone Group’s London office in 2013, and includes joint oversight of the firm’s eight- late 2013 and has been leading the firm’s strong back-office function in Brazil, India and China. investment strategies in Germany as well The marathon runner began his career at consultancy as in European industrials, chemicals Deloitte LLP in London in 2002, moving to the mergers and logistics. He oversaw Blackstone’s and acquisitions team within N M Rothschild & Sons acquisition, alongside Hellman & Friedman, of a 70% stake Ltd.’s banking group in 2005. He joined Inflexion as an in the German classified advertisement business Scout24 investment executive in 2007, before a promotion to Holding GmbH for around €1.5 billion. The deal, completed in assistant director in 2009. February 2014, was Germany’s largest buyout in 12 months. Mr. Pinker also led the acquisition of corporate services provider Intertrust Group in early 2013 and its subsequent CHRISTOF RATJEN merger with European fiduciary manager ATC Group, which Blackstone bought in mid-2013 from HgCapital for €303 Principal, Nordic Capital million. He started his career in the industrials sector covering German buyouts for Carlyle Group in 2001, relocating to London-based Christof Ratjen London in 2007 to cover European industrials and chemicals. joined Nordic Capital in 2011 after By 2009, Mr. Pinker, who speaks Japanese, had moved to seven years executing leveraged distressed debt specialist Strategic Value Partners before finance deals at Barclays Capital. joining Blackstone in 2011. He was made principal at the buyout firm at the beginning of 2015 following a stellar 2014, MALCOLM COFFIN when he executed €2.7 billion worth of financings for its portfolio companies. This Investment Director, included a €350 million package for German health- Inflexion Private Equity care group GHD GesundHeits GmbH, which was the first-ever loan with U.S.-style documentation for Manchester, England-based Malcolm a European company with no U.S. exposure. He was Coffin has had a busy 12 months. also responsible for Norwegian debt collection group Asked by Inflexion Private Equity Lindorff Group AB carrying out a €1.5 billion debt Managing Partners John Hartz and package, which was the largest ever European financial Simon Turner in early 2014 to lead institutions-related high-yield bond deal. Mr. Ratjen the firm’s dual fundraising for the says his year of German military service prepared Inflexion Buyout Fund IV and Inflexion him for the sometimes “brutal” hours of finance. n 44 Private Equity Analyst June 2015 people A Private Word With David Wilton

markets private missing piece of the puzzle is quite likely to be Emerging equity veteran David seen by someone approaching the issue from a Wilton joined Morgan Stanley Alternative different background. Investment Partners as a managing director in 2014. Before that, he served as chief Q: What personal faults do you have the investment officer at the International Finance least tolerance for in others? Corp., where he oversaw some $400 million to $500 million in annual commitments to A: Lack of transparency. I play with all the cards emerging markets private equity funds. on the table and get very irritated with those David Wilton who play with cards concealed under the table. – Masters of Commerce from Q: What personal quality has helped Q: Other than private equity, what job the University you the most in your career? (or career) would you most like to try? of Canterbury, A: Curiosity to understand how things work, A: I find private equity, particularly the growth New Zealand not being too concerned what other people equity and VC parts of the spectrum and – Serves as chairman think and skepticism of the herd. I am not a emerging markets, endlessly interesting. I can’t of the advisory council fan of groupthink. think of anything that would get me up in the for the Emerging morning with a greater spring in my step. Other Markets Private Q: What is one thing that people might things that interest me such as art, design and Equity Association be surprised to know about you? gardening are hobbies and nothing that I would and was a member like to pursue as a career. A: I was for a short time the silent partner in of the International an art gallery, my souvenir of which is a very Development Q: If you had to describe your work style in nice Mark Flood lace painting. Working Group three words, which ones would you choose? of the G8 Impact A: Think. Rush. Pause. (repeat) Investing Task Force Q: What is your idea of misery? A: Treading water without any idea of the Q: What is your greatest regret? way forward. There is always something new – a concept, a discovery, a tide in the A: Not learning a language closely followed by affairs of the world. If you are simply floating not learning an instrument. As a child in New without seeing a new direction to investigate, Zealand, there seemed to be little need to speak something is wrong. anything but English, and despite strong encour- agement from my parents, I never saw the point Q: What is one of the most influential in putting much effort into language classes. Big books that you’ve read and why? mistake from taking too narrow a view.

A: Kenichi Ohmae’s The Mind of the Q: If you had to choose a personal motto, Strategist. I read it decades ago and it what would it be? changed my perspective on business from numbers to a dynamic, organic thing. A: The one we have: Qui Volunt Valent. Those who have the will have the ability. Q: What quality (or qualities) do you most Determination counts for a lot. appreciate in a friend or colleague? Q: If you’re life had a soundtrack to it, what A: Knowing things I do not know and sharing would the title song be? and articulating them well. A room full of people who all know the same thing is both dull and A: Either Miles Davis’s “So What” or Michel dangerous. The world is large and complex Legrand’s version of “My Funny Valentine,” and the only way to obtain even a modest grip which sounds nothing like the regular version. on it is different experience and knowledge in Whenever I am on holiday, Miles Davis is the the room. My experience is that even in your first thing in the CD player and when “So What” own field of expertise – where you have most comes on, the holiday is officially started. n of the picture and where you are least likely to seek advice – it pays to get other views, as the –Compiled by Laura Kreutzer FIVE, TEN, FIFTEEN, TWENTY…

A junior capital provider must have more than just money to help their partners close a deal; they must also have experience and expertise. Non-sponsored and independently-sponsored middle-market transactions especially require an investor with an extensive background managing the many unique issues these deals often encounter. Peninsula Capital Partners has this experience, with a 20-year history of focusing on such deals and with well over 100 closed transactions. Founded in 1995, we were among the first firms with this unique market focus, and we have not deviated from it. Our approach is to understand the sensitivities and goals of our transaction partners and provide them a tailor-made, junior-capital solution, either as a control or non-control investor. This depth of experience is our greatest asset; one that we would like to share with you on your next transaction. Please call us to discuss how we may help you close your next deal. We’ve got experience to burn.

PLEASE ALLOW US TO SHARE OUR CAPITAL STRUCTURING EXPERTISE WITH YOU — 313.237.5100 | WWW.PENINSULAFUNDS.COM The Private Fund Group—Selected Fundraisings

$400,000,000 $4,131,250,000 SEK 12,120,000,000 $3,560,000,000

Yukon Capital New Mountain Proventus Capital CCMP Capital Partners II Partners IV Partners III Investors III

Exclusive Placement Exclusive Advisor Advisor and November 2014 Agent October 2014 Placement Agent October 2014 and Placement Agent September 2014 Placement Agent

$704,294,348 $325,000,000 $4,080,000,000

York Special ElmTree Net Lease Amerimar Enterprises, The Energy & Minerals Opportunities Fund II Fund II Inc. Group Fund III, LP

Advisor and Exclusive Advisor/ Exclusive Placement August 2014 Placement Agent June 2014 Advisor March 2014 Single Asset Joint Venture June 2014 Agent

$400,000,000 $5,150,000,000 $154,300,000 $1,900,000,000 Cypress Acquisition Greenstone Resources Partners HitecVision VII Onex Partners IV LP L.P. Retail Fund, L.P.

Exclusive Placement Exclusive Placement Exclusive Advisor June 2014 Agent May 2014 Exclusive Advisor April 2014 Advisor April 2014 and Placement Agent

€2,276,000,000 $496,000,000 $2,435,000,000 $3,850,000,000

Hayfn Direct Lending Intervale Capital Pine Brook Capital GTCR Fund XI Fund LP Fund III, L.P. Partners II, L.P.

Exclusive Advisor Exclusive Placement Advisor and March 2014 Placement Agent February 2014 and Placement Agent February 2014 Agent January 2014 Placement Agent

€1,300,000,000 $6,000,000,000 $2,677,000,000 €210,612,666

Orion European MBK Partners AAC Capital Benelux Real Estate Fund, C.V. Energy Fund XVI, L.P. Fund III, L.P. Fund III, C.V.

Advisor and Advisor and Exclusive November 2013 Exclusive Advisor November 2013 Placement Agent November 2013 Placement Agent October 2013 Lead Placement Agent

$50,000,000 $3,438,000,000 €1,356,000,000 $1,300,000,000

Crescent Mezzanine HayFin Special Sentinel Capital FMJM RWL LLC Partners VI, L.P. Opportunities Partners V, L.P. Credit Fund, L.P. Residential Whole Loan Exclusive Exclusive Private October 2013 Separate Account July 2013 Advisor July 2013 Placement Agent July 2013 Placement Advisor

€5,328,000,000 £2,000,000,000 $1,600,000,000

The ffth Cinven HgCapital 7, L.P. Marlin Equity IV, L.P. Fund, L.P.

Advisor and June 2013 Advisor April 2013 Placement Agent 2013 Exclusive Placement Agent

The Private Fund Group—Selected Secondary Transactions

$125,840,000 $268,312,110 $182,353,969 $1,085,000,000

Project Project Project Project Manager sponsored Manager sponsored Fund restructuring with Fund restructuring with sale of direct PE assets Cantata RE asset sale Lynx primary staple Skywalker primary staple Bumper with primary staple

November 2014 Exclusive Advisor November 2014 Exclusive Advisor November 2014 Exclusive Advisor September 2014 Exclusive Placement Advisor

$356,052,915 $208,891,553 $495,000,000 $170,000,000

Project Project Project Manager sponsored sale Project Sale of an infrastructure Sale of a portfolio of private of direct PE assets Manager sponsored sale of Flight private equity fund interest Chorus equity fund interests Aria with primary staple Hawk hedge fund LP interests

September 2014 Exclusive Advisor August 2014 Exclusive Advisor June 2014 Exclusive Placement Agent June 2014 Exclusive Advisor

Delivering excellence. Exceeding client expectations. The Private Fund Group credit-suisse.com

PEA Deals BW 7.25 x 10.indd 1 2/17/15 1:03 PM